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China has announced a steep increase in tariffs on American goods, raising the rate from 84% to a whopping 125%.

The new duties, set to begin on Saturday, are a direct answer to the United States' decision to increase tariffs on Chinese imports earlier this week.

China's Finance Ministry released a strong statement criticizing the US actions. "The US' move breaks international trade rules and ignores the global system it once helped build," the ministry said.

The statement also called the rising US tariffs "a joke" and said that China would no longer react to future tariff hikes, CBS News said.

"If the US keeps raising tariffs, it won't make any economic sense anymore," the statement continued. "China will fight to the end if its interests are harmed, but we won't keep playing the numbers game."

The tariff battle is the latest in a growing trade war between the world's two largest economies.

Earlier this week, President Trump raised US tariffs on Chinese goods to 145%, the highest on record. The president also temporarily froze new tariffs on other countries for 90 days, hoping to ease global market fears.

China Files WTO Complaint, Ramps Up Trade Retaliation

However, those hopes faded fast. Stock markets in Europe, which had seen slight gains early in the day, fell sharply after China's announcement. Investors are now worried the trade fight could slow down the global economy.

"Recession risk is much, much higher now than it was a couple weeks ago," said Adam Hetts, global head of multi-asset at Janus Henderson.

In addition to the tariff hike, China has filed another formal complaint against the US at the World Trade Organization.

It has also taken other steps, such as restricting American film imports and warning its citizens against travel and study in some US states.

China says this round of tariff increases may be its last—unless the US does something extreme.

Some experts believe the two countries are nearing a point where trade between them could stop altogether. When tariffs rise above 35%, many companies can no longer afford to sell their goods abroad, Reuters said.

"Trade between the US and China is nearly broken," UBS analysts wrote in a report. "There's just no room left for back-and-forth tariff retaliation."

China has also started building alliances elsewhere. President Xi Jinping is preparing for a tour of Southeast Asia and has recently met with leaders from Europe. Chinese officials are aiming to strengthen ties with the European Union and other trade partners.

"China is open to talks," the Commerce Ministry said. "But threats are not the way to deal with us."

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