Chinese strongman Xi Jinping isn't going to give Donald Trump an easy win on trade. That's the message of Beijing's quick response to Washington's plan, announced late Tuesday, to impose a 25% tariff on $50 billion in Chinese-made goods. Hours later, China's State Council issued its own $50 billion tariff list targeting American exports. Stocks fell Wednesday on risks of trade conflict between the world's two largest economies before recovering on signs of strong U.S. economic growth.

Commerce Secretary Wilbur Ross tried to play down China's retaliation, noting that the U.S. exports affected “amount to about three-tenths of a percent of our GDP. So it's hardly a life-threatening activity.” Perhaps, but the potential damage is large. The Administration promises to bring other tariff cases under Section 301 of U.S. trade law. If Beijing follows through on its promise to give as bad as it gets, investors are right to be worried.

Beijing's tariff list is also notable for including the top U.S. exports to China: soybeans and aircraft. In both industries, the U.S. is the world's leading producer and China the largest importer. That will hurt Chinese companies and consumers, at least in the short run. But it will inflict more pain on Midwestern farmers and Boeing workers if the tariffs last. Mr. Trump's protectionism will punish in particular the farm states he carried in 2016.

Chinese airlines can buy planes from Airbus instead of Boeing, though they will have less leverage on price. The U.S. supplies two-thirds of China's soybean market, and look for Argentina and Brazil to steal market share. Chinese use soybeans to feed pigs, and the price of pork may rise. But Chinese leaders will justify any consumer pain as necessary to stand up to U.S. trade bullying.

The retaliation also undercuts Washington's argument that its tariff list of 1,300 products would minimize the impact on American companies and consumers. U.S. Trade Representative Robert Lighthizer says the goods are available from other sources, so prices should remain stable.

The U.S. list targets industries in which China is pressuring American companies to give up their intellectual property rather than cheap consumer goods such as apparel. But the tariffs will hit American companies that have invested in China and disrupt supply chains, damaging U.S. competitiveness.

The U.S. is on stronger ground in tightening rules on China's acquisition of companies with valuable intellectual property. That threatens Beijing's ambition of global tech leadership and signals the U.S. will hold out for fundamental changes to the way China mistreats foreign companies.

Chinese leaders say Mr. Trump's demand to bring down the bilateral trade deficit by $100 billion is unreasonable, and they're right about the economics. The trade deficit has more significant causes than trade policy, and it isn't affecting American jobs much with a U.S. unemployment rate of 4.1%.

But the Chinese may be willing to make a deal along those lines—especially if it lets them continue their mercantile practices of helping Chinese companies dominate high-tech markets. Early talks between Chinese economic czar Liu He and Treasury Secretary Steve Mnuchin have broached managed-trade solutions such as China buying more American semiconductors and some preferential market access for U.S. financial firms.

Mr. Trump claims the tariffs are merely a negotiating tool, but no one can predict the damage if both sides dig in. Potential Democratic presidential candidate Sen. Elizabeth Warren visited Beijing last weekend and warned leaders that the U.S. needed to recalibrate economic relations because China had failed to open its markets as promised. The free-trade voices in the Republican Party are mostly mute, and Beijing's abuses have alienated most of China's friends in Washington, even in the business community.

With roughly 60 days to negotiate before the two sides are due to impose the tariffs, the trade conflict is now a game of chicken with both sides rhetorically lashed to the steering wheel. Both countries will be hurt if they can't reach a settlement. Tariffs risk undermining Mr. Trump's tax reform and deregulation successes, and Mr. Xi needs continuing rapid growth to prevent public unrest.

The best solution would be for the two to strike a deal before the tariffs hit and then work out a longer-term agreement built on reciprocal treatment. The economic danger is that both sides, and Mr. Trump in particular, seem to see more benefit in trade brinkmanship.