It's been another 'Manic Monday' for savers and financiers.

Having awakened at the start of recently to the game-changing news that an unknown Chinese start-up had actually developed an inexpensive synthetic intelligence (AI) chatbot, they found out over the weekend that Donald Trump really was going to bring out his danger of introducing an all-out trade war.

The US President's decision to slap a 25 per cent tariff on products imported from Canada and Mexico, and a ten per cent tax on deliveries from China, sent stock exchange into another tailspin, simply as they were recuperating from last week's thrashing.

But whereas that sell-off was mainly restricted to AI and other technology stocks, this time the results of a potentially drawn-out trade war could be far more damaging and widespread, and perhaps plunge the global economy - including the UK - into a downturn.

And the choice to delay the tariffs on Mexico for one month provided only partial respite on international markets.

So how should British investors play this highly unstable and unforeseeable circumstance? What are the sectors and assets to prevent, and who or what might become winners?

In its simplest kind, a tariff is a tax enforced by one nation on products imported from another.

Crucially, the task is not paid by the foreign company exporting but by the receiving organization, which pays the levy to its government, offering it with helpful tax profits.

President Donald Trump speaking with press reporters in Washington today after Air Force One touched down at Joint Base Andrews

These could be worth as much as $250billion a year, or 0.8 percent of US GDP, according to specialists at Capital Economics.

Canada, Mexico and China together account for $1.3 trillion - or 42 per cent - of the $3.1 trillion of items imported into the US in 2023.

Most economic experts hate tariffs, mainly due to the fact that they trigger inflation when companies hand down their increased import expenses to consumers, sending out costs higher.

But Mr Trump loves them - he has explained tariff as 'the most stunning word in the dictionary'.

In his recent election campaign, Mr Trump made no secret of his strategy to impose import taxes on neighbouring nations unless they curbed the prohibited flow of drugs and migrants into the US.

Next in Mr Trump's sights is the European Union, where he's said tariffs will 'certainly happen' - and perhaps the UK.

The US President states Britain is 'escape of line' but an offer 'can be worked out'.

Nobody should be surprised the US President has chosen to shoot very first and ask concerns later on.

Trade sensitive business in Europe were also struck by Mr Trump's tariffs, including German carmakers Volkswagen and BMW

Shares in European durable goods companies such as beverages giant Diageo, which makes Guinness, fell sharply amid fears of higher costs for their products

What matters now is how other nations react.

Canada, Mexico and China have currently struck back in kind, triggering worries of a tit-for-tat escalation that might swallow up the whole international economy if others do the same.

Mr Trump concedes that Americans will bear some 'brief term' pain from his sweeping tariffs. 'But long term the United States has actually been swindled by virtually every nation in the world,' he added.

Mr Trump states the tariffs enforced by previous US President William McKinley in 1890 made America thriving, ushering in a 'golden age' when the US overtook Britain as the world's biggest economy. He wishes to repeat that formula to 'make America fantastic again'.

But specialists say he runs the risk of a re-run of the Smoot-Hawley Tariff Act of 1930 - a devastating procedure introduced simply after the Wall Street stock exchange crash. It raised tariffs on a broad swathe of products imported into the US, leading to a collapse in international trade and worsening the impacts of the Great Depression.

'The lessons from history are clear: protectionist policies rarely provide the intended advantages,' says Nigel Green, president of wealth manager deVere Group.

Rising costs, inflationary pressures and interrupted worldwide supply chains - which are even more inter-connected today than they were a century ago - will affect organizations and customers alike, he added.

'The Smoot-Hawley tariffs intensified the Great Depression by stifling global trade, and today's tariffs run the risk of activating the same destructive cycle,' Mr Green includes.

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Perhaps the best historical guide to how Mr Trump's trade policy will affect investors is from his first term in the White House.

'Trump's launch of tariffs in 2018 did raise revenues for America, however US corporate profits took a hit that year and the S&P 500 index fell by a fifth, so markets have actually understandably taken shock this time around,' says Russ Mould, director at investment platform AJ Bell.

The great news is that inflation didn't increase in the aftermath, which may 'relieve existing monetary market fears that higher tariffs will mean higher prices and greater prices will indicate higher rate of interest,' Mr Mould adds.

The reason prices didn't leap was 'due to the fact that consumers and business refused to pay them and sought out cheaper choices - which is specifically the Trump strategy this time around', Mr Mould explains. 'American importers and foreign sellers into the US elected to take the hit on margin and did not hand down the cost effect of the tariffs.'

Simply put, business absorbed the higher expenses from tariffs at the cost of their profits and sparing consumers rate rises.

So will it be different this time round?

'It is tough to see how an escalation of trade stress can do any great, to anybody, a minimum of over the longer run,' says Inga Fechner, senior economic expert at investment bank ING. 'Economically speaking, escalating trade stress are a lose-lose scenario for all nations involved.'

The effect of a worldwide trade war might be ravaging if targeted economies retaliate, rates increase, trade fades and development stalls or falls. In such a situation, rates of interest might either increase, to suppress greater inflation, or fall, to enhance sagging development.

The agreement amongst experts is that tariffs will imply the cost of obtaining stays greater for longer to tame resurgent inflation, however the reality is no one really understands.

Tariffs may likewise result in a falling oil rate - as demand from industry and customers for dearer products droops - though a barrel of crude was trading higher on Monday amidst fears that North American supplies may be interfered with, causing scarcities.

In any case a dramatic drop in the oil price might not be sufficient to conserve the day.

'Unless oil prices come by 80 per cent to $15 a barrel it is not likely lower energy costs will offset the results of tariffs and existing inflation,' states Adam Kobeissi, creator of a prominent financier newsletter.

Investors are playing the 'Trump tariff trade' by switching out of dangerous properties and into standard safe sanctuaries - a pattern professionals say is most likely to continue while uncertainty persists.

Among the hardest struck are microchip and innovation stocks such as Nvidia, which fell 7 per cent, and UK-based Arm, which is off 6 per cent, as financial markets brace for retaliation from China and curbs on semiconductor sales.

Other trade-sensitive companies were also hit. Shares in German carmakers Volkswagen and BMW and customer goods companies such as drinks giant Diageo fell greatly in the middle of worries of greater costs for their products.

But the most significant losers have been cryptocurrencies, which skyrocketed when Mr Trump won the US election however are now falling back to earth.

At $94,000, Bitcoin is down 15 per cent from its recent all-time high, while Ethereum - another major fell by more than a third in the 60 hours considering that news of the Trump trade wars struck the headings.

Crypto has taken a hit due to the fact that investors believe Mr Trump's tariffs will sustain inflation, which in turn may trigger the US main bank, the Federal Reserve, to keep interest rates at their current levels or even increase them. The effect tariffs might have on the course of rate of interest is uncertain. However, greater interest rates make crypto, which does not produce an earnings, less attractive to financiers than when rates are low.

As financiers leave these extremely unstable assets they have stacked into generally much safer bets such as gold, which is trading at a record high of $2,800 an ounce, and the dollar, which rose against major currencies the other day.

Experts say the dollar's strength is actually a benefit for the FTSE 100 since much of the British business in the index make a great deal of their cash in the US currency, meaning they benefit when profits are equated into sterling.

The FTSE 100 fell the other day however by less than a lot of the significant indices.

It is not all doom and gloom.

'One huge hope is that the tariffs do not last, while another is that the US Federal Reserve assists with some rates of interest cuts, something for which Trump is already calling,' states AJ Bell's Mr Mould.

Traders expect the Bank of England to cut rates this week by a quarter of a percentage point to 4.5 percent, while the opportunity of three or more rate cuts later on this year have actually risen in the wake of the trade war shock.

Whenever stock markets wobble it is appealing to stress and offer, but holding your nerve normally pays dividends, experts state.

'History likewise reveals that volatility breeds chance,' states deVere's Mr Green.

'Those who are reluctant danger being caught on the incorrect side of market motions. But for those who gain from past disturbances and take decisive action, this duration of volatility could provide some of the best chances in years.'

Among the sectors Mr Green likes are European banks, due to the fact that their shares are trading at fairly low costs and rates of interest in the eurozone are lower than elsewhere. 'Defence stocks, such as BAE Systems, are also appealing since they will give a steady return,' he adds.

Investors ought to not hurry to sell while the picture is cloudy and can keep an eye out for nerdgaming.science possible bargains. One method is to invest regular monthly amounts into shares or funds instead of large lump amounts. That way you decrease the risk of bad timing and, when markets fall, you can buy more shares for your money so, as and when prices rise again, you benefit.