Commerce Secretary Wilbur Ross signaled there’s more pain ahead unless China changes its economic system, as the Asian nation repeated it will never surrender to U.S. trade threats.

“We have to create a situation where it’s more painful for them to continue their bad practices than it is to reform,” Ross said in an interview on Fox Business Network on Thursday. The U.S. will keep turning up the pressure on China for as long as the country refuses to level the economic playing field, said Ross.

“The reason for the tariffs to begin with was to try and convince the Chinese to modify their behavior. Instead they have been retaliating. So the president now feels that it’s potentially time to put more pressure on, in order to modify their behavior,” he said.

President Donald Trump fanned tensions by ordering his trade office to considering imposing a 25 percent duty on $200 billion worth of Chinese goods, up from an initial 10 percent rate. The move for a higher tariff, which was announced Wednesday, is intended to bring China back to the negotiating table for talks over U.S. demands that China make structural changes to its economy and narrow the U.S. trade deficit. The negotiations broke down last month.

No Blackmail

China’s government vowed to strike back against further U.S. actions and said “blackmailing“ attempts would fail.

“China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries,” China’s Ministry of Commerce said in a statement Thursday on its website. The “carrot-and-stick” tactic won’t work, it said.

A global stocks selloff moderated in the U.S. early on Thursday as investors weighed the Trump administration’s latest threats to free trade with strong earnings and optimism about the economy.

Along with its pledge to fight back, China also left the door open for a resumption of negotiations. “China has consistently advocated resolving differences through dialogue, but only on the condition that we treat each other equally and honor our words,” the ministry said.

The U.S. is open to renewing formal negotiations with China, though Beijing must agree to open its markets to more competition and stop retaliating against U.S. trade measures, according to two senior administration officials who briefed reporters Wednesday on the condition of anonymity.

While the duty on the additional $200 billion of Chinese goods likely won’t be imposed until after a public review ends next month, economists and business groups are already warning that tariffs will disrupt supply chains and push up prices for imported goods. The Trump administration already slapped duties on $34 billion of Chinese goods last month, which prompted immediate retaliation from China, and another $16 billion will likely follow in the coming days or weeks.

The International Monetary Fund has cited escalating trade disputes as a growing downside risk that’s threatening the strongest global economic upswing in seven years.

Ross said on Thursday that imposing U.S. tariffs on what would add up to about half of all Chinese imports, which were valued at more than $500 billion last year, won’t cause a major economic upheaval.

A 25 percent levy “on $200 billion, if it comes to pass , is $50 billion a year,” said Ross on Thursday. “$50 billion a year on a $18 trillion economy” is a fraction of a percent, he said, adding “It’s not something that’s going to be cataclysmic."

The administration last month released a list of thousands Chinese products it wants to slap with an additional 10 percent in tariffs, ranging from television components to handbags and seafood to baseball gloves. The duties could take effect after the administration draws up its revised, final list of imports following a public comment period. Hearings are scheduled for Aug. 20 to 23 and the comment period has been extended to Sept. 5 from late August.

Trump said last month that he’s willing to impose tariffs on every good imported from China, which totaled more than $500 billion last year. American companies, industry and consumer groups have pleaded with the administration to avoid tariffs, saying they could raise their costs and eventually lead to price hikes for consumers.