Beijing has hit back in the latest round of the month-long trade war, saying it is ready to retaliate if US President Donald Trump goes through with his threat to raise tariffs.

"China has made full preparation for the US threats to escalate the trade war, and will have to retaliate to defend national pride and the people's interests," China's Ministry of Commerce said.

US President Donald Trump this week said he may increase the proposed tariff on US$200 billion of Chinese goods to 25 per cent from 10 per cent.

Trump asked US Trade Representative Robert Lighthizer to consider hiking the duties, which could be implemented as early as next month.

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The escalation is once again rattling global markets – including the local NZX.

"There has been an uptick in fear in markets," says Pie Funds chief executive Mike Taylor.

"It's definitely having an effect on sentiment for investors."

The reporting season in the US had seen trade war rhetoric used as an excuse to sell things off, if the numbers came in less than perfect, he said.

"It's starting to look worrying. At the start of the year, when the rhetoric started to come out, we all thought perhaps this was just Trump posturing," he said.

"As he has started to attack different countries it has started to become more concerning and its reaching the point where people are perhaps reconsidering decisions."

Taylor noted US motorcycle manufacturer Harley Davidson's consideration of a move to Europe.

He wasn't convinced by arguments that the US economy was firing and would ultimately benefit from the trade war.

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"Part of the reason the US is doing so well is because they have such a large trade deficit with China, the $500b deficit with China allows them to have a very low inflation rate because goods are coming into the US at cheaper and cheaper rates," he said.

"That's the low inflationary environment that's meant they have low interest rates for longer which has juiced things up."

In fact, with the Trump tax cuts supercharging US growth there was a risk the US economy was overheating and that could increase the risk of a market crash and recession, Taylor said.

"It's very hard for a developed country to sustain 4 per cent growth and when things start to overheat that causes stress, it causes wage inflation, it causes interest rates to rise and those are typically the things that end up causing a recession."

The possibility that Trump did get a win on trade couldn't be ruled out but the longer-term risk around US economic policy remained, Taylor said.

"Maybe it's a 50/50 call. I would still question whether the US economy is overheating," he said.

"What does that mean for 2019? Even if this all resolves and there is a permanent cease fire in terms of the trade wars they are staring down the barrel of trillion-dollar deficit and that doesn't bode well."