THE US has targeted $3 billion (£1.9 billion) of Chinese textiles, electronic goods and other products for punitive sanctions, setting in motion a potentially massive trade war between the two countries. Within minutes of the announcement in Washington, Beijing hit back with retaliatory sanctions against US exports to China.

Under the measures set out by the acting US Trade Representative, Ms Charlene Barshefsky, a host of Chinese products, including $750 million worth of silks and $500 million of fax machines, cellular phones and other consumer electronic products, will be hit by 100 per cent supplementary import tariffs, after a 30 day "comment period" expires on June 17th.

The United States says dozens of plants in China are producing millions of copies of pirated music, films and computer software, much of it for export. US industries say they lose $2.3 billion a year to Chinese pirates.

Washington says Beijing failed to live up to a 1995 agreement to crack down on piracy of US copyrights, patents and trademarks. Chinese officials yesterday insisted they had enforced the agreement and said they were putting the final touches to their own list of targeted US made goods to be hit with retaliatory sanctions.

Two days of talks in Beijing between the US trade negotiator Mr Lee Sands and Chinese officials failed to resolve the dispute before publication of the preliminary list. "We can report no positive progress," an official of China's Ministry of Foreign Trade and Economic Co operation (MOFTEC) said in Beijing.

Last year the United States imported from China some $46 billion worth of goods while exporting just $12 billion of products to China. Beijing says it has enforced the agreement but the White House Chief of Staff, Mr Leon Panetta, said China has not gone far enough to satisfy Washington.

The intellectual property dispute is one of a number of thorny issues affecting US relations with China. Tensions over Taiwan, China's nuclear technology sales to Pakistan, human rights abuses and a huge $34 billion trade deficit with China will weigh heavily in the upcoming congressional debate over China's Most Favoured Nation trade status.

Despite the copyright fight and concerns over human rights abuses, US President Bill Clinton plans to renew China's trade status, allowing its goods to enter the US at the same low tariff levels as most other trading partners, when it expires.