Recent escalation: Donald Trump proposed additional 10% tariffs on a further US$300 billion worth of Chinese imports from 1 September. This is surprising, given that the two countries appeared to have found some common ground at the G20 meeting in June. However, the truce was short-lived and China responded with its own set of measures inform of a suspension of US agricultural imports and currency devaluation, which could further escalate the situation.

Economic implications: Global trade will remain under pressure. There is no reason to expect a recession, but the impact on growth will be sufficient to change economic policies, starting with monetary easing. Most central banks in emerging countries are also in an easing mode. The risk now is that the trade war will turn into a currency war. The trade war will redesign the map of global value chains and some economies may therefore be able to benefit from new foreign direct investments.