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

Having awakened at the start of last week to the game-changing news that an unknown Chinese start-up had established a low-cost artificial intelligence (AI) chatbot, they found out over the weekend that Donald Trump truly was going to perform his hazard of introducing a full-blown trade war.

The US President's choice to slap a 25 percent tariff on goods imported from Canada and Mexico, and a 10 per cent tax on shipments from China, sent out stock exchange into another tailspin, simply as they were recuperating from recently's thrashing.

But whereas that sell-off was mainly confined to AI and other technology stocks, this time the effects of a potentially lengthy trade war could be far more destructive and prevalent, and possibly plunge the worldwide economy - consisting of the UK - into a slump.

And the decision to postpone the tariffs on Mexico for one month provided only partial break on global markets.

So how should British financiers play this highly unstable and unpredictable situation? What are the sectors and properties to prevent, and who or what might become winners?

In its most basic kind, a tariff is a tax enforced by one nation on goods imported from another.

Crucially, the duty is not paid by the foreign company exporting but by the receiving service, which pays the levy to its government, supplying it with useful tax profits.

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

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

Canada, Mexico and China together represent $1.3 trillion - or 42 percent - of the $3.1 trillion of products imported into the US in 2023.

Most economists hate tariffs, mainly due to the fact that they trigger inflation when companies pass on their increased import costs to customers, sending out prices higher.

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

In his recent election campaign, Mr Trump made obvious of his strategy to impose import taxes on neighbouring nations unless they curbed the unlawful 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 take place' - and possibly the UK.

The US President says Britain is 'way out of line' however an offer 'can be worked out'.

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

Trade sensitive companies in Europe were also hit by Mr Trump's tariffs, consisting of German carmakers Volkswagen and BMW

Shares in European durable goods companies such as drinks giant Diageo, that makes Guinness, fell sharply in the middle of worries of higher costs for their products

What matters now is how other nations react.

Canada, Mexico and China have currently struck back in kind, prompting fears of a tit-for-tat escalation that might engulf the entire global economy if others do the same.

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

Mr Trump says the tariffs enforced by former US President William McKinley in 1890 made America prosperous, ushering in a 'golden era' when the US overtook Britain as the world's greatest economy. He wishes to repeat that formula to 'make America excellent again'.

But professionals say he risks a re-run of the Smoot-Hawley Tariff Act of 1930 - a devastating measure introduced simply after the Wall Street stock market crash. It raised tariffs on a broad swathe of products imported into the US, leading to a collapse in global trade and exacerbating the results of the Great Depression.

'The lessons from history are clear: protectionist policies seldom deliver the intended advantages,' states Nigel Green, primary executive of wealth manager deVere Group.

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

'The Smoot-Hawley tariffs worsened the Great Depression by stifling international trade, and today's tariffs run the risk of activating the same damaging cycle,' Mr Green adds.

How Trump's personal crypto raises worries of 'harmful' corruption in White House

Perhaps the finest historical guide to how Mr Trump's trade policy will impact financiers is from his first term in the White House.

'Trump's launch of tariffs in 2018 did raise profits for America, however US corporate revenues took a hit that year and the S&P 500 index fell by a 5th, so markets have naturally taken shock this time around,' states Russ Mould, director at investment platform AJ Bell.

Fortunately is that inflation didn't spike in the consequences, which might 'mitigate current financial market fears that greater tariffs will suggest greater prices and higher prices will mean higher interest rates,' Mr Mould includes.

The reason rates didn't jump was 'due to the fact that consumers and business refused to pay them and sought out more affordable options - which is exactly the Trump strategy this time around', Mr Mould explains. 'American importers and foreign sellers into the US chosen to take the hit on margin and did not pass on the expense impact of the tariffs.'

To put it simply, companies absorbed the greater expenses from tariffs at the expense of their profits and sparing consumers price increases.

So will it be various this time round?

'It is difficult to see how an escalation of trade stress can do any great, to anyone, at least over the longer run,' states Inga Fechner, senior economic expert at investment bank ING. 'Economically speaking, escalating trade tensions are a lose-lose scenario for all nations included.'

The effect of a worldwide trade war might be devastating if targeted economies strike back, prices rise, trade fades and development stalls or dokuwiki.stream falls. In such a scenario, rates of interest might either increase, to suppress higher inflation, or fall, to boost sagging growth.

The consensus among experts is that tariffs will mean the expense of obtaining stays greater for longer to tame resurgent inflation, but the fact is no one truly knows.

Tariffs may likewise lead to a falling oil rate - as need from industry and customers for dearer products droops - though a barrel of crude was trading greater on Monday amid fears that North American materials may be interfered with, resulting in shortages.

In either case a dramatic drop in the oil cost may not be adequate to save the day.

'Unless oil prices visit 80 percent to $15 a barrel it is unlikely lower energy costs will balance out the effects of tariffs and existing inflation,' says Adam Kobeissi, founder of a prominent financier newsletter.

Investors are playing the 'Trump tariff trade' by switching out of dangerous properties and into traditional safe houses - a pattern professionals say is 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 business were also struck. Shares in German carmakers Volkswagen and BMW and durable goods business such as beverages giant Diageo fell greatly amid fears of higher costs for their products.

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

At $94,000, Bitcoin is down 15 percent from its current all-time high, while Ethereum - another significant cryptocurrency - fell by more than a third in the 60 hours because news of the Trump trade wars hit the headlines.

Crypto has taken a hit since investors think Mr Trump's tariffs will sustain inflation, which in turn might cause the US main bank, the Federal Reserve, to keep interest rates at their existing levels or perhaps increase them. The impact tariffs might have on the course of interest rates is uncertain. However, higher rates of interest make crypto, which does not produce an income, less appealing to financiers than when rates are low.

As investors flee these highly unpredictable assets they have stacked into typically much safer bets such as gold, which is trading at a record high of $2,800 an ounce, and the dollar, which surged against major currencies yesterday.

Experts say the dollar's strength is in fact an advantage for the FTSE 100 because a number of the British business in the index make a lot of their cash in the US currency, suggesting they benefit when revenues are equated into sterling.

The FTSE 100 fell yesterday however by less than many of the major indices.

It is not all doom and gloom.

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

Traders anticipate the Bank of England to cut rates this week by a quarter of a percentage indicate 4.5 per cent, while the chance of three or more rate cuts later this year have actually increased in the wake of the trade war shock.

Whenever stock markets wobble it is appealing to panic and offer, but holding your nerve generally pays dividends, experts say.

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

'Those who think twice danger being captured on the wrong side of market movements. But for those who gain from past interruptions and take definitive action, this duration of volatility could present some of the finest chances in years.'

Among the sectors Mr Green likes are European banks, since their shares are trading at fairly low rates and rate of interest in the are lower than in other places. 'Defence stocks, such as BAE Systems, are also appealing because they will offer a steady return,' he adds.

Investors must not rush to offer while the picture is cloudy and can keep an eye out for potential bargains. One method is to invest regular month-to-month amounts into shares or funds rather than large lump sums. That way you minimize the risk of bad timing and, when markets fall, you can buy more shares for your cash so, as and when rates increase again, you benefit.