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Fears of a trade war with China sent markets spiraling Wednesday, after Beijing announced a new round of punitive tariffs on American-made products.

The Dow Jones opened down 494 points, and the Nasdaq and S&P were each down around 1.5 percent. Key losers were automakers Ford and General Motors and aircraft manufacturer Boeing, reflecting China’s focus on punishing those industries.

Investors were digesting an announcement from Chinese officials that they intend to increase tariffs by up to 25 percent on a list of 106 American goods, a response to President Donald Trump’s move to punish China for its trade deficit with the U.S.

“The broadening scope of US-China trade tensions is seen as a growing threat to global growth and corporate earnings,” said Alec Young of FTSE Russell.

Earlier on Wednesday, Commerce Secretary Wilbur Ross downplayed Beijing's response, telling CNBC, “I’m frankly a little surprised that Wall Street was so surprised by it. This has been telegraphed for days and weeks.”

Ross also said he considered it likely that the current situation could lead to negotiations between the two economic powerhouses, especially since the tariffs would not be enforced immediately.

"The market is concerned about this thing escalating right now," James Paulsen, chief investment strategist at The Leuthold Group, told CNBC. "It's not so bad if we have a few tariffs on a few products, but if it escalates worldwide, then you're really threatening the recovery globally."