The United States and China traded blows on Monday in the latest escalation of their tariff war, unnerving Wall Street and threatening to draw American consumers into the fray for the first time.

Both nations, which just days earlier had anticipated sealing a comprehensive commercial deal, instead took steps to raise new trade barriers. In Beijing, the Chinese government announced plans to impose tariffs on $60 billion worth of American products in retaliation for U.S. tariffs that President Trump increased on Friday.

Trump, meanwhile, began the process of expanding U.S. tariffs to cover all $540 billion in Chinese imports — a potentially seismic jolt to the global economy that is expected to raise prices for everyday products such as cell phones, sunglasses, cameras and televisions.

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“There will be price hikes at Target, Costco, Home Depot and Walmart,” said Nelson Dong, a partner with Dorsey & Whitney in Seattle. “The importers are going to pass on some or all of the tariff to the consumer and that will become much more readily apparent and harder to mask.”

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With hopes fading for an early resolution of the year-long U.S.-China trade dispute, the president said he would meet Chinese President Xi Jinping at the G20 leaders summit in Osaka, Japan, on June 28-29. Treasury Secretary Steven Mnuchin told CNBC that the two sides remained in “ongoing” negotiations.

“I love the position we’re in,” the president told reporters.

Investors were less impressed, sending the stock market to its worst one-day performance in months. The Dow Jones industrial average, which was down 719 points at its low, ended the day down more than 617 points or 2.4 percent to close at 25,324.99. All 30 Dow stocks lost ground.

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During an early afternoon appearance in the Oval Office with Hungarian Prime Minister Victor Orban, the president appeared unfazed by the market jitters.

He boasted incorrectly that the federal government is collecting “hundreds of billions of dollars” in tariff revenue and said he planned to use $15 billion of that amount to bail out farmers suffering from lost sales to China.

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“Our farmers will be very happy. Our manufacturers will be very happy. Our government will be very happy,” Trump said. “It’s working out very well.”

In fact, the Treasury Department has collected $39 billion in customs duties over the first seven months of the current fiscal year, roughly $18 billion more than in the same period one year earlier.

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Industry groups also proved hostile to the president’s latest action. Most industries have cheered the president for confronting China over its pilfering of trade secrets and market-distorting policies. But executives have grown increasingly restive as the tariff toll has mounted.

“This is a self-inflicted wound that will be catastrophic for the nation’s economy,” said Rick Helfenbein, president and CEO of the American Apparel & Footwear Association. “By tightening the noose and pulling more consumer items into the trade war, the President has shown that he is not concerned with raising taxes on American families, or threatening millions of American jobs that are dependent on global value chains.”

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After a tweet from an editor of the Global Times, a Chinese state-affiliated publication, suggested that China might cease purchases of U.S. agricultural products and reduce Boeing orders, the embattled aircraft maker told CNBC it was confident the two sides would reach “an agreement that benefits both U.S. and Chinese manufacturers and consumers.”

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Boeing’s stock price fell by almost 5 percent on Monday.

The sense of deepening confrontation between the world’s two largest economies represents a sharp contrast to last week’s expectations of an imminent deal. The president said Monday that the two sides had completed “95 percent” of an agreement before talks broke down.

After concluding that the Chinese were reneging on terms they had agreed to during earlier bargaining rounds, Trump last week opted to more than double tariffs on $200 billion in Chinese imports.

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Shortly after the finance ministry announced the retaliatory tariffs, an anchorman for state television read an official government commentary in a live prime-time segment.

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“If we discuss, our door is always wide open; if we fight, we’ll fight to the last,” CCTV anchorman Kang Hui said. “The U.S.-initiated trade war with China is just a hurdle in China’s development process. It is no big deal. China must strengthen its confidence, overcome difficulties, turn crisis into opportunity, and fight to create a new world.”

The nationalistic notes Kang struck quickly became the most searched subject on Chinese social media Monday evening.

That tariff increase to 25 percent from 10 percent took effect on Friday. The tariffs Trump set in motion on Monday would hit an additional roughly $300 billion in imports, leaving almost no products from China entering the United States without incurring a tax.

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Trump frequently claims that the Chinese are paying the tariffs, insisting in a tweet on Monday “there is no reason for the U.S. consumer to pay the tariffs.” Of the 25 percent levy, he claimed “4 points were paid by the U.S., 21 points by China,” an apparent reference to a 2018 study by a team of Swiss and German economists.

That research relied on evidence from the 1990s rather than looking at what actually happened after Trump imposed the tariffs, economists said. More recent empirical studies concluded that Americans are paying the tariff tab.

“Using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of the 2018,” concluded a March paper by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University.

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“This is not some kind of macroeconomic crisis or huge shock,” said economist Mary Lovely of Syracuse University. “But it is going to be tough on lower-income households.”

Trump’s tariff comments clashed with those of National Economic Council Director Larry Kudlow, who acknowledged in an interview on “Fox News Sunday” that Americans will suffer.

“In fact, both sides will pay. Both sides will pay in these things,” Kudlow said.

The president is encouraging companies to relocate production from China to the U.S. or another country like Vietnam, which is not affected by the new tariffs. But switching suppliers is costly and time-consuming, say some business leaders, who fear the administration’s goal is to unravel the commercial links between the U.S. and China.

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“Not only is there no deal, but the barriers are going up and the decoupling pressures are going to be even greater,” said Rufus Yerxa, president of the National Foreign Trade Council.

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With talks at a standstill, at least for now, investors and executives are settling in for a longer fight. If Trump did hit all Chinese imports with a 25 percent tax, U.S. economic output would shrink by at least $120 billion “as companies would have to rebuild entire supply chains,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an investor note.

Corporate earnings, the key to stock prices, would drop around 10 percent, he added.

Still, despite Monday’s market slide, investors continue to expect the two sides to eventually reach a deal, Shepherdson said.

That might require the personal intervention of the two presidents.

“Ultimately, this is a political decision for the president and not an economic decision,” said Ely Ratner, executive vice president of the Center for New American Security. “Does the political benefit of standing up to China change as the tariffs bite the economy? That’s the fundamental question.”

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