U.S. President Donald Trump plans to impose tariffs on up to USD 60 billion in Chinese goods for what he calls misappropriation of U.S. intellectual property under Section 301 of the 1974 U.S. Trade Act.
The escalating tension sent shivers through financial markets as investors foresaw dire consequences for the global economy if trade barriers start going up.
In a telephone call with Mnuchin, Liu, a Harvard-trained economist who advises President Xi Jinping, said China still hoped both sides would remain "rational" and jointly work together to keep trade relations stable, the official Xinhua news agency said.
The Section 301 investigation report "violates international trade rules and is beneficial to neither Chinese interests, U.S. interests nor global interests", Xinhua cited Liu as saying.
"China has already prepared, and has the strength, to defend its national interests," Liu said, adding that China hopes both sides can work hard to protect the broad picture of generally stable Sino-U.S. trade and business relations.
Both sides agreed to continue to communicate on the matter, the report added, without providing further details.
China showed readiness to retaliate by declaring plans to levy additional duties on up to $3 billion of U.S. imports, including fruit and wine, in response to U.S. import tariffs on steel and aluminium that were due to take effect on Friday.
The state-run Global Times said China was only just beginning to look at means to retaliate, following the announcement of its initial response.
"We believe it is only part of China's countermeasures, and soybeans and other U.S. farm products will be targeted," the widely-read tabloid said in a Saturday editorial.
"It does not look like just a trade war, but rather the U.S. is trying to bully China and the rest of the world in order to make China concede economic resources and development opportunities to the U.S. and make the U.S. forever big and strong."
China has made great efforts to be constructive to try and deal with the trade frictions in the face of U.S. provocation, the ruling Communist Party's official People's Daily wrote in a commentary.
"But Washington was determined to choose rashness and impetuousness, and the necessary effect from this was China's follow-up actions to resolutely protect its own legitimate interests," it said.
The United States should not underestimate China's determination to protect itself, the paper said in an article signed "Zhong Sheng", or "Voice of China", used to express its views on foreign affairs.