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Trade negotiations between the U.S. and China have devolved over the past few days with both sides announcing more aggressive retaliatory tariffs, much to the dismay of global businesses, according to international trade lawyers.

“It's really spooked clients,” said Mario Mancuso, a former official for the Committee on Foreign Investment in the United States who now leads Kirkland & Ellis' international trade and national security practice in Washington, D.C.  

“In the run-up to the trade negotiations last week, the market had priced in some resolution. There was a broad consensus—a soft consensus, but a consensus nonetheless—that there would be a trade deal,” he added. “Now we're hearing a lot of concern.”

On Friday, President Donald Trump followed through with a threat he made days earlier on Twitter and increased tariffs on $200 billion of imported Chinese goods from 10% to 25%. His administration is now poised to impose a 25% tariff on another $300 billion of goods, which essentially covers all imports from China.

The Office of the U.S. Trade Representative has set a June 17 deadline for written comments on the planned tariff hike. On that same day, the USTR's Section 301 Committee is slated to hold a public hearing on the proposed tariffs, which could be enacted as early as June 24.

“That's an aggressive schedule. That's fast,” said Duane Layton, global head of Mayer Brown's international trade law practice in Washington, D.C. He added, “If you're making a product in the U.S. and bringing components or raw materials or inputs in from China, are you going to continue to bring those things in from China if you now have to pay a 25% tariff?”

Adams Lee, an international trade lawyer at Harris Bricken in Seattle, said he's been advising clients to “buckle up” for an “unpredictable, bumpy ride.” While both sides could negotiate a deal over the next few weeks, he expected that wouldn't happen and the U.S. would instead enact the proposed 25% tariff on virtually all Chinese imports.

“Once the USTR issues that federal registration notice—all those notices have gone into effect,” he said. “There's no reason to expect that the self-proclaimed “Tariff Man” is going to back down.”

China has denounced Trump's hardball negotiation tactics as “jeopardizing the interests of both sides and not meeting the general expectations of the international community.” 

In response, China plans to slap new tariffs on another $60 billion of U.S exports, effective June 1. The forthcoming tariff hike covers a wide variety of U.S.-made goods, from honey and liquefied natural gas to cosmetics, vodka, toilet paper, printers and fire extinguishers.

At the same time, though, China has announced that it will, for the first time during the trade dispute, begin a tariff-exclusion process for certain U.S. imports, “according to China's interests.”

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