The escalating Trump trade war with China is going to trigger a “chain reaction of negative events around the world”, according to Nigel Green, the founder and CEO of deVere Group.

The trade war has escalated, with Trump’s administration announcing a third round of tariffs on Chinese exports. The tariffs of 10% are on $200bn worth of goods from China.

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The US previously imposed 25% tariffs on Chinese goods worth $34bn last Friday, initiating a key battle in the Trump trade war.

Beijing responded to this initial move by imposing its own tariffs on US goods worth an equal $34bn. The US responded with a second wave of tariffs on Chinese goods worth $16bn.

Global economy warnings over the Trump trade war

Green warns that the Trump trade war will have negative implications for the global economy.

“It is going to lead to higher inflation in the US, as import tariffs raise the cost of imported goods while domestic producers find that they can increase their prices as foreign competition weakens. This means interest rates will be hiked and the dollar will go up,” he said.

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“A stronger dollar also increases stress in emerging markets, many of which have borrowed heavily in recent years in dollars and who now find interest and capital repayments on these loans have shot up in local currency terms.

“In addition, emerging markets are particularly vulnerable to a downturn in exports resulting from a rise in quotas and import by the US, given that exports are a key driver of growth for many under-developed countries with China the most obvious example.”

The trade war will soon affect a large number of consumer goods. A list of thousands of additional goods being affected by the third wave of tariffs has been released. It includes items such as furniture, tires and clothing.

Market volatility concerns

A trade war between China and the US, the world’s largest economies, will also prompt significant market volatility. The markets have already responded negatively to developments in the Trump trade war, with the FTSE100 falling more than 1%.

“Investors need to brace themselves for months of heightened posturing from the different parties, which is likely to increase market turbulence,” advised Green.

“And as Trump potentially marches off to a trade war, a good fund manager will help investors sidestep the risks and embrace potential opportunities.”