Beijing has vowed countermeasures against Washington if US President Donald Trump makes good on his threat to impose new 100 per cent tariffs on Chinese imports.
Trump's latest threat came after China unleashed a raft of export restrictions on rare earth minerals last week.
The escalating tensions threaten to derail months of progress in trade talks.
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"Resorting to threats of high tariffs is not the right way to engage with China," a Ministry of Commerce spokesperson said on Sunday, in Beijing's first comments on the threat.
"If the US persists in acting unilaterally, China will resolutely take corresponding measures to safeguard its legitimate rights and interests," the spokesperson added.
"Our position on a tariff war remains consistent – we do not want one, but we are not afraid of one."
The rapid escalation of trade tensions between the world's two largest economies has sunk stocks, rattling investors and industries by igniting fears of a repeat of the tit-for-tat tariff battle in spring, when levies on Chinese and American imports soared to around 145 per cent and 120 per cent respectively.
It also adds fresh uncertainty into the ongoing trade talks between the two nations. Trump and Chinese leader Xi Jinping were expected to hold a highly anticipated meeting in South Korea in two weeks' time but Trump, citing the rare earths issue, has cast doubt on that meeting happening.
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Beijing shows no sign of backing down, with the ministry spokesperson instead urging Washington to "promptly correct its wrong approach" and "preserve the hard-won progress in negotiations".
The commerce ministry described the new rules on rare earths as a "legitimate move" and blamed Washington for the latest escalation, pointing to the Trump administration's introduction of a series of new restrictive measures against China within two weeks of the latest round of trade talks in Madrid in September.
Since then, Washington has added multiple Chinese firms to its export control list, expanding its controls to cover listed companies' subsidiaries, as well as imposing special port fees for Chinese ships.
"The US actions have seriously harmed China's interests and undermined the atmosphere of bilateral economic and trade talks. China firmly opposes these moves," the spokesperson said.
The sweeping new rare earth controls announced by Beijing included an expanded list of restricted minerals and extended curbs targeting their production technologies and overseas use, including for military and semiconductor applications.
That is expected to put significant pressure on global industries and tech supply chains which rely on these minerals to produce everything from everyday electronics, semiconductors and automobiles to fighter jets.
On Truth Social, Trump had described China's "shocking" move as "extremely hostile" and a "moral disgrace in dealing with other nations."
But experts said Beijing's measures broadly mirror restrictions Washington has imposed on semiconductors over the years, which limit the export of chips or chipmaking equipment to China – whether from the US or from a third country where it was made with US technology.
China's commerce ministry said Washington's reaction to its new rare earths rules showcase its "double standards".
"For a long time, the United States has overstretched the concept of national security and abused export controls, adopting discriminatory measures against China, and imposing unilateral 'long-arm jurisdiction' restrictions on a wide range of products," the spokesperson said.
The US export control list covers more than 3000 items — compared with just over 900 on China's list, they added.
Beijing has long criticised Washington for exerting control beyond its borders through export rules that bar third-country companies from supplying China with chips made using American technology.
But China's move this week signalled a shift in its strategy, by adopting similar tactics.
