The US plans to impose tariffs on about $50bn in Chinese goods and limit the country’s investment in the US in retaliation for years of alleged intellectual property theft.
The White House said the actions were necessary to counter unfair competition from China’s state-led economy.
It said years of talks had failed to produce change. China said it was ready to retaliate with “necessary measures”.
The latest sanctions have raised fears of a global trade war.
US stock markets sank ahead of the announcement, but losses were reduced after President Trump said the US and China were negotiating.
Signing a memo related to the sanctions, Mr Trump said he was looking for “reciprocal” trade terms for American companies.
The tariffs follow an investigation of Chinese policies ordered by Mr Trump in August.
The White House said the review found a range of “unfair” practices in China, including restrictions on foreign ownership that pressured foreign companies into transferring technology.
The review also found evidence that China imposes unfair terms on US companies; steers investments in the US to strategic industries; and conducts and supports cyber attacks.
The White House said it has a list of more than 1,000 products that could be targeted by tariffs. Businesses will have the opportunity to comment before the final list goes into effect.
On Thursday, China’s commerce ministry said it was ready to retaliate against the new tariffs.
“China will not sit idly by and let its legitimate rights and interests be harmed, and will certainly take all necessary measures to resolutely defend its legitimate rights and interests,” it said in a statement.
The ministry also pointed to a ruling by the World Trade Organisation (WTO) that found that Washington had not fully complied with a 2014 ruling against its anti-subsidy tariffs on Chinese products, including solar panels and wind towers.
China’s commerce ministry said the WTO ruling “proves that the US side has violated WTO rules” and “repeatedly abused trade remedy measures”.
“[This] has seriously damaged the fair and just nature of the international trade environment, and weakened the stability of the multilateral trading system.”
The WTO has also ruled against China’s trade practices. In January, the organisation said China must lower its tariffs on broiler chickens imported from the US. (Excerpts from BBC)