China has increased punitive tariffs on imports of a U.S. animal feed ingredient known as distillers' dried grains (DDGS) from levels first proposed last year, potentially escalating a trade spat between the world's two largest economies.

In a final ruling, the Commerce Ministry said on Wednesday that anti-dumping duties will range from 42.2 percent to 53.7 percent, up from 33.8 percent in its preliminary decision in September. Anti-subsidy tariffs will range from 11.2 percent to 12 percent, up from 10 percent to 10.7 percent.

The ruling is a major victory for China's fledging ethanol industry, which had complained the U.S. industry was unfairly benefiting from subsidies, and follows a year-long government probe.

On Wednesday, Beijing said it found the domestic DDGS industry had "suffered substantial harm" due to subsidized imports from the United States.

China is the world's top buyer of DDGS, a by-product of corn ethanol that is used by feed mills as a substitute for corn and soymeal. China imports almost all of its needs from the United States, the largest exporter.

The decision is a big blow to the larger U.S. ethanol industry, including global traders Archer Daniels Midland Co (ADM) and Louis Dreyfus, along with biofuel producer Poet LLC, oil refiner and ethanol producer Valero Energy Corp and grains group Andersons Inc.

The penalty hike was larger than experts had expected, and comes amid growing tensions between the two countries over China's corn subsidies and its steel and aluminum exports.

U.S. President-Elect Donald Trump, who takes office on Jan. 20, has threatened to impose punitive tariffs on Chinese goods coming into the United States.

Many Chinese businesses have already started to wind back imports of U.S. DDGS since the preliminary ruling in September, switching to domestic suppliers or alternatives like soymeal.

"I don't buy DGGs from the U.S. anymore and have turned to domestic DDGs, soymeal and rapemeal," said Mr Hu, who is in charge of buying protein in southern China for feed manufacturer New Hope Liuhe. He declined to give his first name as he is not authorized to speak to the media.

Imports have steadily dropped in recent months.

Shipments in October and November fell to 135,000 tons and 163,000 tons respectively, about a third of the total in August before the first ruling. In the first 11 months of the year, imports were down 53 percent at just under 3 million tons.

The new rates will take effect from Thursday and be in force for five years.