These EU items are those that usually move through China before ultimately being shipped to the US, and thus are not exempt from the new tariffs.

“Around $4.5bn of European exports to China are caught up in this [US] taxation process,” said UBS Wealth Management’s global chief economist Paul Donovan.

On Monday, The US imposed fresh tariffs on $200bn worth of Chinese goods on Monday and later on, China also retaliated– with tariffs on $60bn in American items.

The escalating trade war is set to have major repercussions on nearly every country on the planet as it will cause international companies to readjust their sales and supply chains.

Across the globe, economists and trade experts have outlines a myriad of knock-on effects that will be felt in countries around the world – including deterioration in business sentiment and cheaper products on global markets.

Since April, the Chinese currency has declined by about 9% against the US dollar, meaning the new 10% tariff on thousands of Chinese items may not have as much of a direct impact as people expect, according to Rajiv Biswas, HIS Markit’s chief economist for the Asia-Pacific region.

The tariff would simply negate the benefits of a weaker yuan for American importers.

“For now, there’s no impact. The US administration probably understands that,” he told Yahoo Finance UK last week.

The real concern however, is the threat of tariffs jumping from 10% to 25% at the start of 2019. That period is when American businesses and consumers would really feel the pain, with higher costs for items including soy sauce, seafood and sewing machines. According to trade experts, the new American tariffs can redirect the flow of Chinese goods away from the US and towards other markets – possibly leading to excess supplies and cheaper prices in other nations.

“Yes, Chinese products may be diverted to other markets. They may be sold at below-market prices,” warned David Henig, a former UK trade negotiator and director of the European Centre for International Political Economy in an interview last week.

John Hardy, a currency strategist at Saxo Bank Group, warned that:“Initially, there could be a slightly deflationary impact” as Chinese products are rerouted to other nations.

A spokesperson at the European Commission stated that the EU was “monitoring the situation” to ensure that there was no dumping of cheap Chinese goods into the European market – which would undercut European firms.