Sky-high US-China tariffs are a mutual trade embargo that is sure to hurt both sides

It is important not to lose sight of why trade conflict has erupted in the first place, and that is as a reaction to China's surging trade surplus

- George Magnus

Sky-high tariffs that now hang heavily over US-China trade mean, in effect, they have declared a trade embargo on each other, normally an act of war. The economic consequences for both will hurt.

The US's $150bn (£114bn) or so of exports to China will fall away quickly, while China's $440bn of exports to the US may drop by up to 75% in the next 18 months, unless negotiation happens. No one will be spared the effects.

The consequences could tip the US into a mild recession this summer and are undermining one of the country's principal weapons, namely the power, leverage and reach of its financial system. Leading indicators, including consumer confidence, inflation and capital spending, are all flashing warning signs.

It is also an ill wind that last week brought both rising bond yields in the US Treasury market and a falling dollar.

This trade war is distinctly unwelcome for the Chinese Communist party, which only last month revealed its alarm at the underlying fragility of China's economy. Chinese exports were on fire last year, accounting for half of its growth and expanding three times as fast as world trade. The country ran a $2tn trade surplus in manufactured goods.