WASHINGTON/BEIJINGWASHINGTON/BEIJING (Reuters) - China has underestimated U.S. President Donald Trump's resolve to impose more tariffs unless it changes its "predatory" trade practices, a White House trade adviser said on Tuesday, as Trump greatly expanded the amount of Chinese imports possibly facing new duties.

The growing trade conflict hit financial markets hard, with Beijing accusing the United States of "extreme pressure and blackmailing" and vowing to retaliate. With both sides upping the ante, the risks of a damaging trade war grew dramatically.

Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated against his previous targeting of $50 billion in imports, aimed at pressuring China to stop stealing U.S. intellectual property.

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He also threatened tariffs on another $200 billion of Chinese products should Beijing hit back again, bringing to $450 billion the potential amount of Chinese exports that could be targeted. That sum approaches the roughly $500 billion in total annual Chinese exports to the United States.

White House trade adviser Peter Navarro, who views China as a hostile economic and military power, said Beijing had more to lose from a trade war. China imported $129.89 billion of U.S. goods last year, while the United States purchased $505.47 billion of Chinese products, according to U.S. data.

"The fundamental reality is that talk is cheap," Navarro told reporters on a conference call, saying China "may have underestimated the strong resolve of President Donald J. Trump."

"If they thought that they could buy us off cheap with a few extra products sold and allow them to continue to steal our intellectual property and crown jewels, that was a miscalculation," Navarro said, referring to now-abandoned talks in which Beijing had offered to purchase more U.S. products.

The trade confrontation pits the world's two largest economies against each other and could disrupt global supply chains for the tech and auto industries, sectors heavily reliant on outsourced components.

Trump's trade strategy toward China sent global stock markets skidding and weakened both the dollar and the Chinese yuan on Tuesday. Shanghai stocks plunged to two-year lows. The Dow Jones Industrial Average shed 1.15 percent and gave up all of its 2018 gains. The S&P 500 dropped 0.4 percent.

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Yields on safe-haven U.S. Treasuries narrowed. Agricultural commodities, which have been targeted by China, fell sharply, chief among them soybeans, which fell to their lowest level on spot markets since December 2007.

China's commerce ministry said Beijing will fight back with "qualitative" and "quantitative" measures if the United States publishes an additional list of tariffs on Chinese goods.

"The United States has initiated a trade war and violated market regulations, and is harming the interests of not just the people of China and the U.S., but of the world," the ministry said in a statement.

Trump has raised trade tensions on other fronts as well. He slapped tariffs on steel and aluminum from Canada, Mexico and the European Union, threatened to kill the North American Free Trade Agreement and is studying new tariffs on car imports.

Economists complain that Trump's efforts to reduce America's deficit are misguided, saying the gap in trade with China reflects the underlying economy. Some believe Trump is bluffing, contrary to Navarro's comments.

'SUICIDE PACT'

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FILE PHOTO: FILE PHOTO: The label of a Washington D.C. sweatshirt bears a U.S. flag but says ''Made in China'' at a souvenir stand in Washington, DC, U.S., January 14, 2011. Reuters/Kevin Lamarque/File Photo/File Photo FILE PHOTOS: Republican presidential nominee Donald Trump (L) holds a rally with supporters in Council Bluffs, Iowa, September 28, 2016 and Chinese President Xi Jinping waits for leaders to arrive at a summit in Shanghai May 21, 2014. Reuters/Jonathan Ernst/Aly Song/File Photos FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. Reuters/Damir Sagolj/File Photo FILE PHOTO: A Cadillac Escalade SUV by General Motors Co of the U.S. is displayed during a media preview of the Auto China 2018 motor show in Beijing, China April 25, 2018. Reuters/Joe White/File Photo China's Ministry of Commerce spokesperson Gao Feng attends a news conference at the commerce ministry in Beijing, China, June 19, 2018. Reuters/Thomas Peter FILE PHOTO: Shipping containers being loaded onto Xin Da Yang Zhou ship from Shanghai, China at Pier J at the Port of Long Beach in Long Beach, California, U.S., April 4, 2018. Reuters/Bob Riha Jr./File Photo FILE PHOTO: Staff members set up Chinese and U.S. flags for a meeting between Chinese Transport Minister Li Xiaopeng and U.S. Secretary of Transportation Elaine Chao at the Ministry of Transport of China in Beijing, China April 27, 2018. Reuters/Jason Lee/Pool/File Photo FILE PHOTO: The new Ford Focus is displayed during a media preview of the Auto China 2018 motor show in Beijing, China April 25, 2018. Reuters/Damir Sagolj/File Photo U.S. President Donald Trump addresses a meeting of the National Space Council in the East Room of the White House in Washington, U.S., June 18, 2018. Reuters/Leah Millis FILE PHOTO: Zang Yi charges her Tesla car at a charging point in Beijing, China, April 13, 2018. Reuters/Thomas Peter/File Photo U.S. President Donald Trump concludes his remarks at a meeting of the National Space Council at the White House in Washington, U.S. June 18, 2018. Reuters/Jonathan Ernst FILE PHOTO: The Starbucks logo is seen outside its coffee store in front of Zhengyangmen Gate at Qianmen Commercial Street in central Beijing, April 19, 2012. Reuters/Jason Lee/File Photo

Goldman Sachs Chief Executive Lloyd Blankfein said Trump's approach to China on trade may be "bluster."

"I don't know that we're in a suicide pact on this. I suspect that we are not going to cause the economies to collapse," Blankfein added.

Investment bank JPMorgan estimated in a report on Tuesday that Trump's tariffs on China would have only modest effects on the broader U.S. economy.

It based its analysis on a 12 percent average U.S. tariff on $450 billion of imports from China, estimating that this would add just 0.4 percentage points to U.S. consumer price inflation if the additional costs of the duties were passed on to consumers in their entirety.

Also caught in the crossfire was Chinese telecoms company ZTE Corp, whose rescue by Trump in a deal with Chinese President Xi Jinping appeared in doubt after a U.S. Senate vote on Monday.

U.S. business groups said members were bracing for a backlash affecting all American firms in China, not just in sectors facing tariffs. Jacob Parker, vice president of China operations at the U.S.-China Business Council in Beijing, said some companies have reported Beijing is meeting with Chinese businesses to discuss shifting contracts for U.S. goods and services to suppliers from Europe or Japan, or to local Chinese firms.

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Beijing has mounted campaigns against Japanese and South Korean companies in the past after diplomatic disputes.

The intensifying trade dispute threatens to put more pressure on the already cooling Chinese economy.

Even with tariffs on an additional $200 billion in Chinese goods, the impact on both China's and the U.S. economy is set to be small, most economists say. The risk of contagion comes from financial markets, they believe, as sharp selloffs could hit consumer and business confidence.