Beijing says it will work with other nations to safeguard its interests and defend the world trade order, as US President Donald Trump struck a defiant tone amid criticism of his vow to impose high tariffs on imports of steel and aluminium.
But analysts and former officials in China said despite intense speculation and escalating rhetoric, the chance of a full-fledged trade war between the world's top two economies remained low as neither side could win without devastating consequences.
The move to impose tariffs of 25 percent on steel and 10 percent on aluminium would "seriously damage multilateral trade mechanisms represented by the World Trade Organisation and will surely have a huge impact on the normal international trade order", Wang Hejun, head of the Ministry of Commerce's trade remedy and investigation bureau, said in a statement late on Friday.
"If the final measures of the United States hurt Chinese interests, China will work with other affected countries in taking measures to safeguard its own rights and interests," the statement said.
Trump's plan has triggered a global backlash and sent stock markets tumbling, with leaders from Asia to Europe voicing scathing criticism and vowing to take countermeasures if they are hit by US tariffs.
But the US leader remained defiant, tweeting on Friday that "trade wars are good and easy to win" when the United States is losing billions of dollars in trade.
Last year the US imported 35.6 million tonnes of steel worth about US$33.6 billion - some 36 percent of its total consumption, according to research firm Wood Mackenzie and data provider Global Trade Tracker.
China accounted for about 3 percent of those imports, but Canada had the largest share at 16 percent, followed by Brazil and South Korea. Canada was also the biggest supplier of aluminium to the US, with 41 percent of imports.
Analysts said China may not be substantially affected by the punitive tariffs, while the move is expected to hit Washington's allies and partners much harder.
Canadian Prime Minister Justin Trudeau called the tariff proposal "absolutely unacceptable" and promised to retaliate. European Commission President Jean-Claude Juncker also warned there would be consequences for the US.
"If the Americans impose tariffs on steel and aluminium, then we must treat American products the same way," Juncker told German television stations.
The proposed tariffs come as Liu He, the most trusted economic adviser of Chinese President Xi Jinping, is visiting the US trying to defuse bilateral trade tensions - just weeks after another Politburo member, State Councillor Yang Jiechi, apparently failed to make any breakthroughs on his US trip.
A White House spokeswoman described Liu's meetings with US officials, including US Trade Representative Robert Lighthizer, National Economic Council director Gary Cohn and Treasury Secretary Steven Mnuchin, as "frank conversations".
Apart from trade, the two nations are also locking horns over other issues. The US Senate on Thursday passed a bill aimed at promoting closer ties with Taiwan, provoking anger in Beijing.
Wei Jianguo, a former deputy commerce minister, said Beijing's statement showed China was considering going to the WTO to seek a resolution.
"[The WTO] seems to be the only official and appropriate channel to solve this dispute. Although it could result in a lose-lose situation, which is certainly not in our interests, we may have to resort to it if the US continues to impose its domestic legislation on other nations," he said.
Li Daokui, a former member of the central bank monetary policy committee and now a Tsinghua University professor, said China should launch a "precise, surgical" strike to counter Trump's move.
"Some products in some parts of the States are also unreasonably low-cost - for instance, General Motors (GM) enjoys big subsidies from the federal and county governments," he said.
"China should find the pain points of Trump and his voters and make it clear that China is not going to be bullied, and that they also have weaknesses."
But he added that China should react "appropriately" to avoid a full-scale global trade war, and that Beijing could respond by bringing down costs for companies and transforming its economy.
Shen Dingli, dean of Fudan University's Institute of International Studies, also said a trade war was unlikely because Beijing had already shown it was willing to make some major concessions by sending two Politburo members to Washington within a month.
"I think Liu He will be able to de-escalate the trade tensions at least for now because he is tasked with avoiding further sanctions on China from the US side and bringing bilateral ties back from the brink of confrontation over trade, which is apparently the priority for the top leaders in Beijing," he said.
It was also in the interests of the Trump administration not to enter into a full-fledged trade war with China, which would not only hurt China, but also its own economy, he said.
But Shen said Beijing was unlikely to make public its proposed compromises any time soon to avoid a public backlash, especially as state media ramps up its rhetoric against Trump's protectionist policies.
He also said Beijing was not expected to team up with other nations on the issue, particularly the European Union which is also unhappy about China's trade practices, or seek a resolution through the WTO.
"Beijing knows all too well that it may lose big in any possible WTO investigation because of its dumping and government subsidies," Shen said. "Like Trump's threats of imposing tariffs, Beijing's remarks could be just part of the negotiation tactics to secure better deals."
-Additional reporting by Xie Yu