China has warned the United States they are "not afraid" of a trade war and threatened retaliatory tariffs worth $3bn, after US President Donald Trump signed an order paving the way for imposing as much as $60bn worth of Chinese goods imports.

The Chinese Ministry of Commerce on Friday said it was considering raising tariffs on 128 US products bound for China, including fruits, nuts, wines, pork, and recycled aluminium, according to a statement on its website.

Stock markets in Asia took a dive on Friday, with Tokyo's Nikkei closing down 4.5 percent and the Hang Seng in Hong Kong falling 2.5 percent.

Beijing has insisted friction should be resolved through negotiations, but a statement issued on Friday by the Chinese embassy in the US said that "if a trade war were initiated by the US, China would fight to the end."

China said it would raise tariffs in two phases, slapping an additional 15 perfect on 120 goods worth nearly $1bn if the US fails to reach a "trade compensation agreement" within an unspecified timeframe.

A 25 percent tariff would be imposed on eight goods worth almost $2bn after "further evaluating the impact of the US measures on China", the statement by the Ministry of Commerce said.

The increased trade tension could prove to be a challenge for President Xi Jinping. A big trade war with the US could slow China's rapid growth critical to his long-term vision.

Brewing trade war

The World Trade Organisation's (WTO) chief on Friday said both countries should show restraint and called on governments to settle their differences through the WTO's mechanisms.

"Actions taken outside these collective processes greatly increase the risk of escalation in a confrontation that will have no winners, and which could quickly lead to a less stable trading system," said Roberto Azevedo.

"Disrupting trade flows will jeopardise the global economy at a time when economic recovery, though fragile, has been increasingly evident around the world."

Trump's move on Thursday was seen as a direct shot in a brewing trade war between the world's two biggest economies.

Saying it would be the "first of many" trade actions, Trump said the measure was aimed at punishing Beijing over the alleged theft of US technology and Chinese pressure on American companies to hand it over.

"We have a tremendous intellectual property theft situation going on," Trump told reporters.

"I really don't see any upside here," Stan Veuger, a resident scholar at the American Enterprise Institute, told Al Jazeera.

"The WTO exists for a reason. It's exactly to settle this kind of dispute.

"I don't think unilateral tariffs imposed by the US, not even in collaboration with its closest allies in Western Europe, are going to force China to make these drastic changes to its industrial structures."