#TrumpTariffs

The return of the global trade war by Donald Trump follows a lull.

But the US president's warning of applying a 50% tariff to all imports from the European Union in a week indicates that the trade war tensions were only on ice.

They have now restarted in full, along with market uncertainty, and social media diplomacy.

It signals major volatility in the next few weeks, leading up to a key G7 summit in Canada later this month.

The essence of what is currently occurring is that after the US chose to row back on its trade-stopping tariff battle with China, the majority of the rest of the planet, particularly major US allies, eased off on their own talks with the US. Allies would not anticipate being treated any worse by the US than China.

Friday's action by President Trump is even more terrible than the worst-case scenario - a 20% tariff rate on the EU in early July after the expiration of the 90-day lull.

As his Treasury Secretary Scott Bessent candidly acknowledged, such threats are intended to "light a fire" under such stalling talks.

Most in the EU, as in Japan, are convinced that the US administration is bluffing, and that it folded over China with the threat of inflation and market risk and will do so again.

So the stage is now set for standoff or maybe the EU to renew its own suspended retaliation, and the rest of the global economy watch in suspense, except for China and the UK.

The UK's bilateral trade agreements with both camps do buffer the British economy to some degree, but complete resumption of a transatlantic trade war would be a trade shock that it would be hard to get out of.