LONDON: Stock markets took the latest escalation in the trade war between the world's top two economies in their stride on Tuesday.
European stocks only briefly turned lower after China retaliated to the latest US sanctions, while Wall Street opened higher, as analysts viewed Beijing's reaction as being moderate and measured.
China announced Tuesday tariffs on US goods worth $60 billion in retaliation for President Donald Trump's decision the previous day to slap duties on $200 billion in Chinese products next week.
"If the United States insists on raising tariffs even more, China will respond accordingly," the finance ministry said in a statement.
Monday's volley of tariffs from the White House will see $200 billion worth of goods taxed at 10 percent from September 24, going up to 25 percent from January 1 if the two sides are unable to hammer out a deal.
Trump warned also that another $267 billion in tariffs has been lined up if Beijing retaliates.
But Beijing went ahead anyway and announced the new tariffs.
While European markets briefly dropped, they rebounded after Wall Street opened higher, as traders took a sanguine view of the developments.
"The more lenient approach from President Trump last night and a measured reaction from Beijing has left traders a little on the optimistic side," said market analyst David Madden at CMC Markets UK.
"It is almost as if a hurdle has been cleared and investors have one less thing to worry about in the near-term," he added.
London gave up its gains, but Paris closed 0.3 percent higher and Frankfurt rose by 0.5 percent.
The Dow was up 0.5 percent in late morning trade.
Fawad Razaqzada at Forex.com called China's latest move "measured and not over-aggressive" as the tariff rates it applied were less than it had previously indicated.
"So it looks like China has blinked first, and this puts the US government in a great position to agree on a new trade deal," added Razaqzada.
Consumer tech giant Apple was spared in this round of tariffs, which excluded smartwatches and Bluetooth devices. Apple's shares were up 0.8 percent in late morning trading.
"There were investors who'd been thinking a 25 percent tariff in one go is a possibility," Shogo Maekawa, a global market strategist with JPMorgan Asset Management, said.
"It could be considered something good in this realm of bad things."
- Key figures around 1530 GMT -
New York - Dow Jones: UP 0.5 percent at 26,190.91 points
London - FTSE 100: DOWN 0.03 percent at 7,300.23 (close)
Frankfurt - DAX 30: UP 0.5 percent at 12,157.67 (close)
Paris - CAC 40: UP 0.3 percent at 5,363.79 (close)
EURO STOXX 50: UP 0.3 percent at 3,355.42
Tokyo - Nikkei 225: UP 1.4 percent at 23,420.54 (close)
Hong Kong - Hang Seng: UP 0.6 percent at 27,084.66 (close)
Shanghai - Composite: UP 1.8 percent at 2,699.95 (close)
Euro/dollar: UP at $1.1860 from $1.1685 at 2040 GMT
Pound/dollar: DOWN at $1.3146 from $1.3159
Dollar/yen: UP at 112.33 yen from 111.83 yen
Oil - Brent Crude: UP 80 cents at $78.85 per barrel
Oil - West Texas Intermediate: UP 85 cents at $69.76 per barrel