China's Ministry of Commerce has announced it is implementing counter tariffs against the US on multiple products.
The government said that it would implement a15 per cent tariff on coal and liquefied natural gas products, as well as a 10 per cent tariff on crude oil, agricultural machinery, and large-displacement cars.
The tariffs announcement comes as the additional blanket 10 per cent tariff on Chinese imports into the US came into effect on Tuesday.
"Just as Canada and Mexico announced retaliation to US tariffs, China is doing the same," AMP chief economist Shane Oliver said.
"So no big surprises.
"A one-month delay is possible with the Chinese tariffs if Trump and Xi talk and reach a deal but it's less likely than was the case with Canada and Mexico."
The White House has said Mr Trump planned to talk with Chinese President Xi Jinping in the next few days.
But it's clear China now wants to send a message to the US president that it sees tariffs as unhelpful and unnecessary.
"The US's unilateral tariff increase seriously violates the rules of the World Trade Organisation," a Commerce Ministry statement said.
"It is not only unhelpful in solving its own problems, but also damages normal economic and trade cooperation between China and the US."
Dr Oliver said the tariff story "has along way to go and this will continue to cause volatility in the Australian dollar and shares."
InTouch Capital Markets Senior FX StrategistSean Callow says he was concerned the Australian dollar and shares could suffer further heavy falls.
"The outlook for the Aussie seemed to have brightened as Trump quickly backed down on his tariff threat to Canada and Mexico," he said.
"But not only did the deadline for tariffs on China pass without a triumphant tweet about a deal, China was ready with its own tariffs on the US.
"The Australian dollar looks set to suffer another round of collateral damage."
China's move signals the commencement of a trade war between the world's two largest economies.
In addition to the tariffs, China announced an investigation into Google.
China will probe the US tech giant for alleged anti-trust violations, according to a statement from the State Administration for Market Regulation.
Marcus Today share market commentator Henry Jennings referred to the trade development as "DEFCON 3".
That's a military term to reference an "increase in defence force readiness" above that required for normal times.
Mr Jennings is using the term in an economic sense.
He see rising jitters on financial markets and tightening financial conditions, which may indicated higher interest rates.
"China has fired back already with tariffs and an investigation which is more symbolic than anything," Mr Jennings said.
"Even more so during a holiday period.
"Google is not a thing in China.
"China is flexing its muscles with rare earths and critical metals too, and has more tools than Mexico and Canada.
"Apple and Tesla would be a target in time."
Despite a sharp move down in the Australian dollar against the greenback, to a session low of 61.75 US cents, the local currency recovered some ground.
