US businesses are now holding off on vital investment decisions because of increasing worries about a global trade war, according to Jerome Powell, the chairman of the US Federal Reserve.

Central bankers have noted a chilling effect on business investment as tit-for-tat tariffs are exchanged between the US and other countries triggered by Donald Trump’s decision to put levies on metals imports.

Mr Powell said: “For the first time we’re hearing about decisions to postpone investment, postpone hiring, postpone making decisions.”

The US Fed chief's revelation, while speaking on a panel of central bankers in Portugal, is one of the first signs that President Donald Trump’s pursuit of a protectionist economic policy is harming domestic companies.