Markets and policymakers moved into crisis mode on Tuesday after a series of steps by Washington and Beijing that marks the most pronounced escalation in U.S.-China commercial tensions in years. The measures — announced across multiple U.S. agencies and answered by Beijing with its own restrictions — targeted high-tech exports, investment screening and a set of consumer and agricultural products, according to CBS News coverage and briefings seen by reporters.

The U.S. action tightened export controls on advanced semiconductor equipment and certain artificial-intelligence related technologies, officials said, citing national security concerns. “We will not cede critical technologies that can erode U.S. military advantages,” a senior administration official told reporters. Within hours, the Chinese foreign ministry condemned the moves as “blatant suppression of China’s legitimate economic development,” and warned it would “retaliate to protect our national interests,” a spokesman said in a statement carried by state media.

Financial markets reacted immediately. Major U.S. equity indexes dropped, with technology and industrial stocks among the worst-hit, while safe-haven assets rallied. Traders pushed the 10-year Treasury yield down, and the yuan weakened against the dollar in onshore trading as investors priced in heightened geopolitical risk. Commodities markets showed early signs of strain: copper futures, a bellwether for global manufacturing demand, slipped amid worries about slower Chinese imports.

The immediate economic stakes are tangible. Bilateral trade in goods and services between the two economies remains one of the world’s largest — analysts estimate annual flows in the high hundreds of billions of dollars — and supply chains for semiconductors, electric vehicles and critical minerals have become deeply intertwined. Corporate executives said the new controls will prompt faster relocation of some supply-chain activities out of China and accelerate investment in friend-shoring to markets like Vietnam, Mexico and India.

“If these measures hold, firms will face higher compliance costs, slower project timelines and more expensive inputs,” said Maya Liu, a trade economist at the Peterson Institute. “That translates into higher prices for consumers and a recalibration of where high-tech manufacturing happens globally.”

Policymakers warned of broader consequences. Congressional leaders from both parties applauded the administration’s emphasis on technology safeguards, even as some business groups urged a more targeted approach to avoid widespread economic fallout. In Beijing, state-owned media framed retaliatory moves as necessary to defend Chinese enterprises, signaling potential restrictions on U.S. agricultural imports, financial services access and corporate licensing.

The long-term picture grows more complicated. Economists say piecemeal restrictions could accelerate bifurcation of the global technology ecosystem, raising the cost of innovation and reducing efficiency gains from global specialization. “A bifurcated technological landscape would slow global growth by raising input costs and reducing cross-border investment,” said Daniel Harper, chief economist at Global Insight.

For consumers and investors, the immediate question is how long the escalation will last and whether it will prompt durable policy realignment. With both capitals facing domestic political pressure to appear tough, analysts warn a short-term flare-up could harden into a longer-term cold commercial war, reshaping investment patterns for years and forcing governments and companies to choose sides in critical areas of technology and trade.