The Trump administration's decision to sanction and potentially cripple Chinese telecoms giant Huawei Technologies has garnered a sharp rebuke from Beijing, which warned the move could damage trade talks.
Shares of Huawei's US suppliers also fell on fears the huge customer of US chips, software and other components would be forced to stop purchases after the US Commerce Department banned it from buying US technology without special approval.
Huawei said in a statement losing access to US suppliers "will do significant economic harm to the American companies" and affect "tens of thousands of American jobs". The company said it would challenge the decision.
The US crackdown, announced on Wednesday, was the latest shot fired in an escalating US-China trade war that is rattling financial markets and threatening to derail a slowing global economy.
Chinese officials said US aggressiveness could hurt the trade talks, which appeared to have hit an impasse in the past week as the US hiked tariffs on Chinese goods and Beijing retaliated with higher duties on US products.
Chinese Commerce Ministry spokesman Gao Feng stressed the US should avoid further damaging Sino-US trade relations. "China will take all the necessary measures to resolutely safeguard the legitimate rights of Chinese firms," Gao told reporters.
China's foreign ministry also announced the formal arrest of two Canadian citizens who were detained shortly after Canada arrested Huawei chief financial officer Meng Wanzhou in December.
Meng faces extradition to the US on charges that she conspired to defraud global banks about Huawei's relationship with a company operating in Iran. She and the company deny the charges.
Canada says China has made no specific link between the detentions of the two men and Meng's arrest, but experts and former diplomats say they have no doubt it is using their cases to pressure Canada.
On Wednesday, the Commerce Department said it was adding Huawei and 70 affiliates to its "Entity List", which bars them from buying components and technology from US firms without government approval. The sanctions have not yet gone into effect.
Lawmakers in the US Congress have long feared Huawei's equipment could be used by the Chinese government to spy on Americans, and the Trump administration's move has won bipartisan support in congress.
As signs emerge that consumers could feel the weight of the trade war with China, Walmart said US prices will rise due to higher tariffs on Chinese goods even as the world's largest retailer reported its best comparable sales growth for the first quarter in nine years.
Walmart chief financial officer Brett Biggs told Reuters the company will seek to ease the pain, in part by trying to buy from different countries.
As negotiations towards resolving the US-China trade war stalled last week, the US ramped up the pressure by raising tariffs on a list of $US200 billion ($A289 billion) worth of Chinese imports to 25 per cent from 10 per cent.
China retaliated with higher tariffs on a revised list of $US60 billion worth of US products.
US President Donald Trump has threatened to put 25 per cent tariffs on another $US300 billion worth of Chinese goods.
"The tariff hike by the United States will only bring greater difficulties to the consultations," Gao said.