Donald Trump’s escalating trade war with China shook global markets yesterday, as US multinationals warned its impact would outweigh the benefits of tax cuts and some Republicans voiced fears about the political fallout.

The planned implementation of tariffs on a further $200bn of imports from China, announced late on Tuesday, rattled investors who had largely ignored previous salvos in the tariff battle between the world’s two largest economies as they focused on the strength of company profits and the wider economy.

“We have seen investors shrug off every threat or implementation of tariffs up until now,” said Kristina Hooper, chief global market strategist at Invesco. “The reaction last week was very short and the focus turned to earnings. I don’t know if it will be as easy to turn the focus back to earnings this time.”