Trade tensions escalated Wednesday morning with news that China would be targeting 108 products in response to the Section 301 actions imposed by the U.S. regarding intellectual property including crucial U.S. agricultural products soybeans, wheat, tobacco, and beef. On Monday, China began instituting tariffs on 128 U.S. products, including pork, ethanol, fruit and wine, in response to President Donald Trump’s steel and aluminum tariffs.

Emma O’Brien, Bloomberg market analyst based in Beijing, China, said including soybeans on the latest list is the “nuclear option.”

China imports $14 billion worth of soybeans every year from the U.S., using much of it to feed its growing pork industry. O’Brien noted that China is “cutting off their own nose to spite their face.”

It also shows that China is not messing around in the tit-for-tat trade spat. “To go straight in on the second round of salvos on soybeans is very interesting,” O’Brien added.

Tom Sleight, president and chief executive officer at the U.S. Grains Council, said it was known U.S. agricultural products would be hit hard in any trade war, but the important thing to remember is that no tariffs have been actually implemented from Wednesday’s announcement. USGC has staff on the ground in China and have said the depth of the threats could require a solution.

Related:China to impose 25% tariff on U.S. soybeans

The notion is things have to get worse before they get better, and there’s going to be an escalation of trade tensions. “Here we are at the high point of escalations, hopefully,” Sleight said. “Hopefully everyone will come to the realization we need each other. China needs U.S. food and agricultural supplies. And the U.S. has a heavy reliance on imports of Chinese goods.”

In his discussions with those in China, Sleight said they're more confident it is going to get worked out. “From sitting in Washington I did inform our Chinese folks that it is pretty serious over here. This is not going to get worked out quietly and quickly.”

“The governments are talking so that is good news,” Sleight added. “We have the focus on getting those discussions and not losing sight of China as a long-term market.”

Sleight said China’s President Xi has made a focus on looking more inward for its nation’s needs, and improving the Chinese citizens’ diets is “an unrelenting force in the global marketplace.” President Xi has placed emphasis on continuing to have a domestic livestock industry and meat production, which in turn needs world grains to feed China’s surging meat production.

USDA announced sales in the past 24 hours of 4.7 million bushels of soybeans to China and 11.9 million to unknown (also believed to be China). Analysts say exporters of U.S. soybeans may try and ship soybeans that are already sold to China as quick as possibly to avoid the duty before it is implemented. This may support U.S. soybean prices in the short-term.

Related:Soybeans plummet on China tariff

China had already largely shifted its business south of the equator as it does every year at this time. Bryce Knorr, market analyst for Farm Futures, said the soybean commitments to China are already down 18% for the year without any tariff in place. “This will only exasperate what is already a weak trade situation with China,” he noted.

Soybeans plunged on the news overnight, dropping 45 cents/bu. and almost breaking a February low after a surprisingly strong finish in recent days.

American Soybean Association President and Iowa farmer John Heisdorffer said the 40 cent drop in future prices this morning already cost U.S. soybean producers.

“At a projected 2018 crop of 4.3 billion bushels, soybean farmers lost $1.72 billion in value for our crop this morning alone. That’s real money lost for farmers, and it is entirely preventable,” he said in a statement.

Heisdorffer says there is still time to reverse the damage. “The administration can still deliver for farmers by withdrawing the tariffs that caused this retaliation. China has said that its 25% tariff will only go into effect based on the course of action the administration takes. We call on President Trump to engage the Chinese in a constructive manner—not a punitive one—and achieve a positive result for soybean farmers.”

Agriculture was not the only sector to feel the pinch. A bevy of other U.S. products, including certain classes of aircraft, cars, plastics, polymers and more (click here to see a full list) were also targeted.

News of these latest tariffs cut into profits on Wall Street, with the Dow dipping around 450 points during early morning trading. Certain manufacturers such as Boeing and Caterpillar were especially affected, dropping 3% to 4%.

Energy markets were down around 2% on the news, with crude oil trading at two-week lows at just above $62 per barrel. Gasoline and diesel prices also trended moderately lower. Safe-haven gold firmed moderately, meantime.