The next stage of the trade war between the US and China has just started according to media reports.
The United States has bumped up its tariff rate from 10% to 25% on around US$200 billion worth of Chinese goods.
Trade wars don't benefit anyone, it's not a 'zero sum' gain. Everyone will lose if it goes ahead, including Australia because China and the US are our two largest trading partners.
China has warned that it will take necessary counter-measures and that it "deeply regrets" the latest tariff hike.
China also said "It is hoped that the US and the Chinese side will work together to resolve existing problems through cooperation and consultation."
The costs of these tariffs are likely to be passed onto American consumers and businesses, it's not as though China is just going to take the tariffs laying down.
If this trade war continues for a long time it could lead to a global economic slowdown, although I have read anecdotes of companies simply shipping products via different locations such as Taiwan.
There are several large ASX shares that could be affected by the trade war because of the impact on China. I'm thinking of companies like Blackmores Limited (ASX: BKL), A2 Milk Company Ltd (ASX: A2M), Bellamy's Australia Ltd (ASX: BAL), BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).
Foolish takeaway
It is in everyone's interests for the trade war to be over, particular for President Trump with an upcoming election. I'm not planning to sell anything based on the latest tariffs, but both the risk and opportunity factors are rising.
