After China threatened to impose new retaliatory tariffs on a variety of American goods - everything from beef to condoms - the war of words between Washington and Beijing escalated yet further.
A top adviser to U.S. President Donald Trump said the newly proposed tariffs were not as severe as the White House had been bracing for, and he warned China not to test Trump's resolve.
"He (Pompeo) was accommodating on this as a direction, and said that he does not want current frictions to continue", said State Councilor Wang Yi, who is also China's foreign minister.
The Trump administration ramped up pressure for trade concessions from Beijing this week by proposing a higher 25 per cent tariff on $270 billion worth of Chinese imports.
"China is in trouble right now - their economy is lousy, investors are walking out, the currency is falling", Kudlow said, in an unusually strong condemnation of a trading partner.
The two countries have been embroiled for months in a trade conflict that has threatened to hurt consumers in both countries.
President Donald Trump this week ordered officials to consider imposing a 25 per cent tax on US$200 billion worth of imported Chinese goods, up from an initial 10 per cent rate.
Washington is expected to soon implement more tariffs on $21 billion in additional Chinese goods, which China has already announced it will match immediately.
The dispute is part of broader USA complaints about global trading conditions that have prompted Trump to raise duties on steel, aluminum, washing machines or solar panels from Canada, Europe, Japan and South Korea.
The Republican president has been keen to show he is tough on trade ahead of tricky congressional elections in November, joking at a rally in Pennsylvania on Thursday: "China is not happy with me".
The escalating dispute, with no settlement in sight, has fueled fears it might chill global trade and economic growth.
China has said new duties will be applied only if Washington pulls the trigger on its new tariffs.
A statement said: "Any unilateral threat or blackmail will only lead to intensification of conflicts and damage to the interests of all parties".
"The implementation date of the taxation measures will be subject to the actions of the U.S., and China reserves the right to continue to introduce other countermeasures", the statement said. "China is increasingly isolated with a weak economy".
Today's new tariffs are set at levels of 25, 20, 10 and five percent.
Beijing can not match those measures dollar for dollar, as its exports far exceed imports. The next round of tariffs on mutual imports worth $16 billion could come into force on Friday.