China's Commerce Ministry said it planned to impose tariff measures of similar size and intensity response.
The S&P 500 slid 2 points, or 0.08 percent, to 2,779.
The Dow Jones Industrial Average .DJI fell 84.83 points, or 0.34 percent, to 25,090.48, the S&P 500 .SPX lost 3.07 points, or 0.11 percent, to 2,779.42 and the Nasdaq Composite .IXIC dropped 14.66 points, or 0.19 percent, to 7,746.38.
The two countries have held several rounds of talks since early May but have yet to result in a deal, as the United States pressures China to narrow a $375 billion trade deficit.
Tariffs weren't the only thing moving markets following a busy week full of encouraging reports on the USA economy and policy announcements from the world's biggest central banks.
Attention is focused on central banks because they are in various stages of pulling away from the emergency stimulus put in place following the Great Recession.
The European Central Bank weighed in on Thursday to say it would end its bond-purchase program at year-end, even if any interest rate hike was still distant.
The Federal Reserve is further along this path.
The U.S. Federal Reserve increased its key interest rate for the second time this year on Wednesday and hinted at two more hikes by the end of 2018, pointing to strength in the U.S. economy.
It is making the moves because of the stronger economy and that may mean something counter-intuitive for the lay investor.
"Stocks and the economy might go separate ways", Miskin said.
Brent crude dropped more than $2 a barrel ahead of an OPEC meeting in Vienna next week as two of the world's biggest producers, Saudi Arabia and Russian Federation, indicated they were prepared to increase output.
Benchmark U.S. crude fell $1.83 to $65.06 per barrel. Brent crude, the global standard, lost 2.50 dollars to 73.44 dollars per barrel.
Boeing (BA.N), the single largest US exporter to China, fell 2 percent, dragging the Dow lower for the fourth day in a row. That helped drag energy in the S&P 500 down 2.1 percent for the largest loss among the 11 sectors that make up the index.
Investors are also weighing the impact of tightening monetary policy by central banks on the equities market.
Declining issues outnumbered advancing ones on the NYSE by a 1.21-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favoured advancers. In Asia, South Korea's Kospi shed 0.8% and the Hang Seng in Hong Kong fell 0.4%. Japan's Nikkei 225 index was an outlier and rose 0.5 percent.
Gold dropped $29.80 to settle at $1,278.50 per ounce, silver fell 78 cents to $16.48 per ounce and copper lost 8 cents to $3.14 per pound. The euro rose to 1.1607 dollars from 1.1591 dollars, and the British pound inched up to 1.3282 dollars from 1.3281 dollars.