The great Trump reflation story, which points to strong equities, weak bonds and a highly valued dollar, is by now thoroughly entrenched in the minds of global investors. Not without reason. But when conviction is near-universal in markets it makes sense to ponder what investors might be missing. For my money the most likely flaw in this narrative relates to the cost of protectionist policies.

There is much that remains uncertain about the new president’s intentions. Yet one thing is blindingly clear. Donald Trump is prepared to risk precipitating a trade war whether by raising tariffs, introducing border taxes that penalise imports relative to exports, or both. The obvious precedent is the Smoot-Hawley legislation of the 1930s which may not have caused the Depression but unquestionably exacerbated it as the imposition of increased tariffs sparked retaliation and damaged world trade.

A trade war in today’s globalised markets may be a more complicated business because of the development of global supply chains. Increasing tariffs on Mexican imports would, for example, be extremely disruptive for American car manufacturers. Whether it would increase employment in the US is moot.