China has said it is considering imposing tariffs on $3bn worth of US products in retaliation to new tariffs announced by US President Donald Trump.
The list of products under consideration by China includes pork, wine, fruit and nuts and stainless steel pipes, among others.
At the same time, China has asked the US to avoid taking US-China trade relations to a "dangerous place".
Beijing said it hoped the US would pull back "from the brink" of a trade war.
On Thursday, the US announced plans to impose tariffs on up to $60bn (£42.5bn) on Chinese imports and limit the country's investment in the US.
The move was a response to years of alleged intellectual property theft by China.
On Friday, China's commerce ministry said economic co-operation was "the only right choice" and urged the US to deal with the issue through dialogue to avoid long-term damage.
But the ministry said it had plans for two steps of retaliatory tariff action:
1. a 15% tariff on 120 goods worth almost $1bn - including fresh fruit, nuts and wine
2. a 25% tariff on eight goods worth nearly $2bn - including port and aluminium scrap.
The first step would be imposed if the US failed to reach a trade agreement. The second after further evaluation of the US tariffs.
China said that while it did not want a trade war, it was not afraid to have one.
Beijing also has plans to pursue legal action through the World Trade Association on US tariffs announced last month against imported steel and aluminium products.
Markets in Asia fell on fears that the US and China were about to embark on a trade war.
The benchmark Nikkei 225 was down 3.5% in late morning trade, Australia's S&P/ASX 200 was down close to 2%, and markets in China were all in negative territory.
US stock markets also closed lower on Thursday.