There were parts of the encounter where Watson managed to match the 2011 French Open champion.
However, she was ultimately unable to prevent the China's Li from running out a 6-2 6-3 victor in New York.
"I didn't come off the court too disappointed because I threw everything out there," she told Sky Sports News.
"I thought Li Na played unbelievable, like a Grand Slam champion, and there wasn't much I could do. I would not be surprised [if she went on to win the competition].
"It was a high class match and it was unfortunate I could not come out on top."
Watson will now compete in the mixed doubles at Flushing Meadows.