Trump announces fresh tariffs on Chinese goods. He has little to lose politically from escalating his trade war

It will take time for the economic impact to be felt, meanwhile the America First President can fire up his base while diverting attention from his other problems

Donald Trump made it a very unhappy Friday for those who worry about trade flows, the global economy, risk, etc.

The US President threw a wrench into the already stumbling trade talks with China with the announcement of a fresh round of tariffs on goods imported from his nation’s biggest economic rival.

The existing ones of 10 per cent, imposed on $200bn (£154bn) of imports, will be raised to 25 per cent, with the threat of more to come.

The implications for the world economy are fairly unpleasant, especially if they are extended. Trade between the US and China equates to 16 per cent of global trade flows. Oxford Economics thinks the spat could knock 0.5 per cent off global GDP in real terms in 2020, which represents umpteen billions of dollars. It also threatens to derail an emerging recovery in business confidence shown in the research firm’s latest global risk survey.

It could easily get a lot worse, with the potential for a global recession if other countries and blocs are drawn in.

The problem faced by economic policy makers and analysts is that Trump personally has very little to lose and much to gain from escalating tensions with China.

The US economy has been putting up strong numbers of late. Some wonder whether there’s a touch of the emperor’s new clothes about them, but the employment data has been good, which is what really matters to the average American.

The tariffs will inevitably have an impact upon the price of consumer goods, which won't go down well. The importers which absorbed the initial 10 per cent are unlikely to be able to hold the line in the face 25 per cent. But these will take time to work their way through the system.

China has inevitably threatened to retaliate, which will hurt US firms that export to the country, but it has much less scope to do so because of the marked trade imbalance that has so riled Trump, who will shift the blame for higher prices, lower growth, elsewhere if it become an issue.

It's often said that no one wins from a trade war. But politically, playing the strongman counts as a win for him, particularly at a time when the he is under pressure, daring a Democrat controlled House of Representatives to try and impeach him in the wake of the controversy over the Mueller report, among other things.

That counts doubly with his base, which has remained stubbornly reluctant to see the flaws in its hero. The latest polls show his approval ratings hovering at around 42 per cent, low for a sitting President, astonishingly high when one considers Trump’s behaviour in office.

They have been in the 30s, reaching a nadir 18 months or so ago, but since then there has been a steady improvement.

Incumbents generally benefit from strong economies and employment numbers but Trump probably considers the downside risk to those is worth it to him with the US election campaign starting to get serious.

Those responsible for pricing risk will have taken note of this. There’s not a direct read across to the relatively low price set for Uber’s shares, valuing the company at a comparatively modest $80bn ahead of its flotation when there had been talk of it hitting $100bn.

But Trump’s actions are reducing the world’s appetite for risk. And the risk presented by controversial tech companies that may never make a profit is high indeed.

There is a chance for the two sides to row back and analysts have taken note that the latest round of tariffs come with an unofficial grace period. Goods in the more than 5,700 affected product categories that left Chinese ports and airports before midnight will be subject to the original 10 per cent duty rate, which wasn’t the case with previous announcements.

But there isn’t a lot of optimism about the two sides reaching a deal over the next couple of weeks. There aren’t any obvious grounds for it.