Although one tariff battle might be over, the trade war is still alive and kicking. On Wednesday, President Donald Trump unexpectedly announced a “90-day delay” on his so-called “reciprocal tariffs,” marking the end of a tumultuous last few days on Wall Street — where stocks booked performances that could only be likened to history market tumbles in 2020, 2008, and earlier.

Unfortunately for many investors — and Americans — the chaos will likely return. Although investors initially rewarded the markets for Trump ‘calling off the dogs’ on countries that had not yet retaliated against the highest tariff rates in a generation, there still remains a $582B elephant in the room.

China trouble: While Trump’s 90-day pause on tariffs means most countries will pay just a 10% tariff rate — in addition to a 25% duty on cars, steel, and aluminum — a heated situation is only getting warmer with China, America’s second-largest trade partner. The nation was quick to retaliate against Trump’s reciprocal tariffs, imposing levies of its own in response to the President’s 54% tariff rate. In response, Trump more than doubled the tariff rate on China — spurring even greater ire from Beijing. As a result of the back and forth, the US now tariffs Chinese goods at 145% — while China tariffs US imports at 84%. That could be a problem unto itself.

• Pundits anticipate that a trade war exclusively with China is enough to push the US into recession, threatening many small businesses and large enterprises alike.
• On the other hand, a trade war with the US could threaten to destabilize China, which counts the US as its largest trading partner — especially in a period where its housing market and broader economy are just starting to recover.

Fallout: New Trade War

A long and expensive trade war with China will likely take its toll on firms like Apple ($AAPL), which flew in more than 600 tons of iPhones ahead of the start of the tariffs. Further, companies with large volumes of sales in the mainland are also at risk — names like Corning ($GLW), Albemarle ($ALB), and Intel ($INTC), among others. But the real risks could come from China’s response, which could be nothing short of financial warfare.

• To meet the moment, China has been slowly devaluing its currency — and pundits speculate it could begin selling its significant stock of US treasuries and mortgage-backed securities to put pressure on the US market.
• In addition, China is reportedly considering the use of tactical cyberattacks against various US assets, including businesses — some of which might even be banned from China as part of its countermeasures.

But there could always be a deal: Trump says he wants to make deals with countries before his 90-day détente concludes — and he hasn’t precluded an extension of his pause. That dealmaking desire extends to China, where Trump says that he “think[s] it’s going to work out.” But an alienated Beijing is willing to fight back. It’s already eying trade partnerships with the rest of the Asian continent in response to the tariffs, which former Commerce Department official Nazak Nikahtar warns could bring trade between the two countries to a halt.