The financial markets have become extremely focused on the twists and turns in the tariff negotiations involving the US and China and, more recently, on the likelihood of a technology war centred around US sanctions against Huawei. 

Trade wars first assumed a central role in market psychology in the final quarter of 2018, when a deterioration in US-China trade relations coincided with a collapse in stock markets across the world. In recent weeks, there have been signs that the same might happen again.

Former US Treasury secretary Lawrence Summers has commented that this is a puzzle, because macroeconomic models indicate that the direct economic effects of tariff increases are likely to be rather small and certainly not enough to explain such large gyrations in equity markets.