The dramatic deterioration in relations came as US Secretary of State Hillary Clinton visited the South Korean capital Seoul on the final leg of a three-nation Asian tour which was dominated by the March 26
sinking, blamed on a North Korean torpedo attack.
"This was an unacceptable provocation by North Korea and the international community has a responsibility and a duty to respond," Mrs Clinton told reporters after talks with South Korean leaders.
A team of international investigators concluded last week that a homing torpedo from a North Korean submarine tore apart the 1,200-ton Cheonan off the west coast, killing 46 South Korean sailors.
On Tuesday South Korea began taking punitive steps against North Korea, ranging from slashing trade, resuming propaganda warfare and barring the North's cargo ships. Those were seen as among the strongest it could implement short of military action.
The US has said evidence of the North's guilt is overwhelming and has backed the South's measures, but key North Korea ally China has said it is still weighing evidence about the incident and has done little but urge calm on all sides.
"I believe that the Chinese understand the seriousness of this issue and are willing to listen to the concerns expressed by both South Korea and the United States," said Mrs Clinton, who visited China before travelling to Seoul. "We expect to be working with China as we move forward in fashioning a response."
The North, which flatly denies any role in the sinking, has warned that retaliatory measures would lead to war. Pyongyang announced on Tuesday that it was cutting relations with South Korea, starting "all-out counter-attacks" against the South's psychological warfare operations and barring South Korean ships and airliners from passing through its territory. On Tuesday the North cut off some cross-border communication links and expelled eight South Korean government officials from a joint factory park at the North Korean border city of Kaesong.
The North's military also issued a statement warning it would "totally ban" the passage of South Korean personnel and vehicles to an inter-Korean zone in the western coastal area, apparently referring to Kaesong, if South Korea does not stop its psychological warfare.
The statement said it would shoot at and "blow up" any loudspeakers South Korea installs at the border. Seoul dismantled such devices six years ago amid warming ties, but said yesterday that it had resumed radio broadcasts into the North and that it would re-install
loudspeakers at the border within weeks.
Despite the rhetoric, North Korea still allowed South Korean workers to cross the border to enter the Kaesong complex yesterday, according to Seoul's Unification Ministry.
The North's statement on Tuesday did not refer to about 800 South Korean company managers and workers at Kaesong. Seoul also excluded Kaesong - the last remaining major joint reconciliation project which provides badly needed hard currency for Kim Jong Il's regime - from its retaliatory measures.
South Korea accused the North of taking "menacing" measures and will "deal with these North Korean threats unwaveringly and sternly," Unification Ministry spokesman Chun Hae-sung said yesterday.