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

Having gotten up at the start of last week to the game-changing news that an unidentified Chinese start-up had developed a low-cost synthetic intelligence (AI) chatbot, they learned over the weekend that Donald Trump actually was going to perform his threat 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 ten per cent tax on shipments from China, sent stock markets into another tailspin, just as they were recovering from recently's thrashing.

But whereas that sell-off was mainly restricted to AI and other innovation stocks, this time the effects of a potentially protracted trade war could be much more destructive and extensive, and maybe plunge the international economy - including the UK - into a downturn.

And the choice to postpone the tariffs on Mexico for one month offered only partial reprieve on global markets.

So how should British investors play this highly volatile and unforeseeable scenario? What are the sectors and properties to prevent, and who or what might emerge as winners?

In its easiest form, a tariff is a tax imposed by one nation on items imported from another.

Crucially, the duty is not paid by the foreign business exporting however by the getting service, which pays the levy to its government, providing it with beneficial tax revenues.

President Donald Trump talking 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 percent of US GDP, according to consultants at Capital Economics.

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

Most economists hate tariffs, mainly due to the fact that they cause inflation when companies hand down their increased import costs to customers, sending rates higher.

But Mr Trump enjoys them - he has actually explained tariff as 'the most lovely word in the dictionary'.

In his current election campaign, Mr Trump made no secret of his plan to impose import taxes on neighbouring countries unless they curbed the illegal 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 possibly the UK.

The US President says Britain is 'escape of line' however an offer 'can be exercised'.

Nobody must be amazed the US President has decided to shoot very first and ask questions later on.

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

Shares in European customer goods business such as beverages giant Diageo, that makes Guinness, fell sharply amidst worries of greater expenses for their items

What matters now is how other countries react.

Canada, Mexico and China have actually already retaliated in kind, triggering worries of a tit-for-tat escalation that might engulf the whole worldwide economy if others follow match.

Mr Trump concedes that Americans will bear some 'short-term' pain from his sweeping tariffs. 'But long term the United States has actually been swindled by virtually every nation worldwide,' he included.

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

But professionals state he risks a re-run of the Smoot-Hawley Tariff Act of 1930 - a disastrous measure introduced just after the Wall Street stock market crash. It raised tariffs on a broad swathe of items imported into the US, leading to a collapse in international trade and exacerbating the effects of the Great Depression.

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

Rising costs, inflationary pressures and disrupted international supply chains - which are far more inter-connected today than they were a century ago - will affect companies and consumers alike, he included.

'The Smoot-Hawley tariffs worsened the Great Depression by suppressing global trade, and today's tariffs risk activating the same devastating cycle,' Mr Green includes.

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

'Trump's launch of tariffs in 2018 did raise incomes for America, but US corporate profits took a hit that year and the S&P 500 index fell by a 5th, so markets have actually not surprisingly taken shock this time around,' says Russ Mould, director at financial investment platform AJ Bell.

The bright side is that inflation didn't increase in the after-effects, which may 'relieve current financial market fears that greater tariffs will suggest higher prices and greater rates will imply greater rate of interest,' Mr Mould adds.

The factor prices didn't leap was 'since customers and business declined to pay them and looked for more affordable choices - which is precisely the Trump plan 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 impact of the tariffs.'

To put it simply, companies took in the greater expenses from tariffs at the expense of their earnings and sparing consumers rate rises.

So will it be different this time round?

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

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

The agreement amongst specialists is that tariffs will indicate the cost of obtaining stays greater for longer to tame resurgent inflation, however the fact is no one really knows.

Tariffs may likewise cause a falling oil rate - as need from market and customers for dearer products sags - though a barrel of crude was trading higher on Monday amid worries that North American supplies might be interfered with, resulting in scarcities.

In either case a significant drop in the oil rate may not be enough to save the day.

'Unless oil prices stop by 80 percent 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 investor newsletter.

Investors are playing the 'Trump tariff trade' by changing out of risky properties and into conventional safe houses - a pattern professionals state is most likely to continue while uncertainty persists.

Among the hardest hit are microchip and technology stocks such as Nvidia, which fell 7 per cent, and UK-based Arm, users.atw.hu which is off 6 per cent, as monetary markets brace for retaliation from China and curbs on semiconductor sales.

Other trade-sensitive companies were likewise hit. Shares in German carmakers Volkswagen and BMW and consumer goods business such as drinks giant Diageo fell sharply in the middle of worries of higher expenses for their products.

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

At $94,000, Bitcoin is down 15 percent from its current all-time high, while Ethereum - another major cryptocurrency - fell by more than a 3rd in the 60 hours because news of the Trump trade wars hit the headlines.

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

As investors flee these extremely unpredictable possessions they have actually piled into generally 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 wiki.tld-wars.space currencies yesterday.

Experts state the dollar's strength is in fact an advantage for the FTSE 100 because numerous of the British companies in the index make a great deal of their money in the US currency, meaning they benefit when revenues are translated into sterling.

The FTSE 100 fell the other day however by less than much 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 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 portion indicate 4.5 percent, while the possibility of three or more rate cuts later this year have increased in the wake of the trade war shock.

Whenever stock markets wobble it is tempting to worry and sell, but holding your nerve generally pays dividends, experts state.

'History also shows that volatility breeds chance,' states deVere's Mr Green.

'Those who think twice risk being caught on the incorrect side of market movements. But for those who gain from previous disturbances and take definitive action, this duration of volatility might present some of the very best chances in years.'

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

Investors need to not hurry to sell while the picture is cloudy and can keep an eye out for prospective bargains. One method is to invest routine month-to-month amounts into shares or funds rather than big lump amounts. That method you decrease the risk of bad timing and, when markets fall, you can buy more shares for your money so, as and when rates increase again, you benefit.