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 stocks spent the entire day in the green, viewing the latest escalation of the US-China trade war as less consequential than feared.
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 counter-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.
- DOJ eyes Tesla -
"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.
All three major US stock indices finished firmly higher, with the Dow ending up 0.7 percent.
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.
Barclays said the tariffs affected a tiny fraction of US gross domestic product, well below one percent.
But the economic costs "are likely to be disproportionately felt by US households," Barclays said in a note.
Barclays also took a less sanguine view of the prospects for conciliation, saying a "further escalation in protectionism...remains a likely outcome."
Among individual companies, Tesla Motors fell 3.4 percent following reports it was under investigation by the Justice Department for fraud in connection with chief executive Elon Musk's aborted effort to take the company private.
Tesla said it was cooperating with the Justice Department, describing the interaction as a "voluntary request" and saying it had not received any subpoenas.
- Key figures around 2100 GMT -
New York - Dow Jones: UP 0.7 percent at 26,246.96 (close)
New York - S&P 500 UP 0.5 percent at 2,904.31 (close)
New York - Nasdaq: UP 0.8 percent at 7,956.11 (close)
London - FTSE 100: DOWN less than 0.1 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 0.4 percent at 3,358.46 (close)
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 $1.1683 at 2100 GMT
Pound/dollar: DOWN at $1.3146 from $1.3157
Dollar/yen: UP at 112.33 yen from 111.85 yen
Oil - Brent Crude: UP 98 cents at $79.03 per barrel
Oil - West Texas Intermediate: UP 94 cents at $69.85 per barrel