The move is likely to hit vehicle plants and farmers in the President's voter base. -China business roundtable, comprised of US and Chinese CEOs in Seattle, Washington September 23, 2015.
The Canadian dollar also changed direction to close higher at an average value of 78.07 cents USA, up 0.02 of a cent from Tuesday's price.
A small-but-growing number of Chinese-assembled cars making their way to the U.S. auto market could be under threat as the Trump administration looks to slap a 25 per cent duty on about US$50 billion worth of imported goods.
President Trump, who has repeatedly vowed to bring manufacturing and jobs back to the United States, directs the Department of Commerce to investigate whether imports of foreign steel from China and other countries could be a threat to national security.
In response, China proposed tariffs on 106 USA products that include soybeans, cars, and a few airplanes, which add up to nearly $50 billion.
"U.S. companies at this point would like to see robust communication between the USA government and the Chinese government and serious negotiation on both sides, hopefully to avoid a trade war", said the chairman of the American Chamber of Commerce in China, William Zarit.
The US Trade Representative's office said that the size of the tariffs against the Chinese economy "is commensurate with an economic analysis of the harm caused by China's unreasonable technology transfer policies to the US economy".
China's commerce ministry said it would hit back with "equal scale and equal intensity", and outlined that 106 United States products in 14 categories would attract an extra 25 per cent tariff.
"Just about every major ICT product was exempted", one USA industry source said of the US list.
Mr Trump said that the United States lost a trade war with China "years ago".
Trump's decision has already triggered blowback from Beijing, which has retaliated by threatening tariffs across numerous US import categories.
"It must be said, we have been forced into taking this action", a deputy commerce minister, Wang Shouwen, said at a news conference.
"What we're talking about on both sides is a fraction of 1 per cent of both economies", he said, adding that the larger concern is the protection of U.S. intellectual property.
There will be a 60-day delay before the USA tariffs take effect, while China said its timetable for the proposed new tariffs would depend on when the United States acted. If anyone wants to fight we will be there with him. It's not clear when they would take effect, and the two countries are still talking.
"The United States has also reportedly warned that Canadian companies bought by Chinese state-owned firms risk seeing their access to US markets reduced". The dollar briefly extended early losses, while China's yuan skidded in offshore trade.
Trump said in a tweet Wednesday morning that "we are not in a trade war with China".
China hoped the USA could relax its export restrictions on technology products, increase the savings rates and increase services trade.
The measures and countermeasures have led to fears of a possible trade war between the world's two largest economies.
China has already slapped tariffs on 128 U.S. products, including wine and pork, totalling to $3 billion in retaliation to Trump's move to impose tariffs on steel and aluminium.
Many companies said they were still assessing the impact of a U.S. list that was long and highly specific. Wary investors sold off industrial giants with heavy exposure to China.
The Chinese embassy in Washington, DC, said in a statement that "such unilateralistic and protectionist action has gravely violated fundamental principles and values of the WTO".