Wall Street analysts warned investors to brace for the trade war between the United States and China to further intensify, after it ratcheted up over the weekend to a level that Cowen says, "on a scale of 1-10, it's an 11." "Overnight, Chinese government retaliated against new U.S. tariffs, and it's designed to get the President's attention," Cowen analyst Chris Krueger said in a note to investors Monday. A Morgan Stanley team of analysts said, "investors should behave as if further escalation will happen in 2019." If that escalation does come, the firm estimated that a global economic recession will come in the next nine months. "We take its literal message of planned tariffs quite seriously. There's a pattern of responding to insufficient negotiation progress with escalation," Morgan Stanley said. This is "a new and potentially more volatile phase," Compass Point analyst Isaac Boltansky said, adding that China's response "marks a pronounced escalation in trade tensions between the world's largest economies."

Chinese President Xi Jinping stands by national flags. Johannes Eisele | AFP | Getty Images

China responded on Monday in two ways to President Donald Trump announcing the U.S. will add 10% tariffs to $300 billion worth of Chinese goods. First, China's central bank allowed its currency the yuan to fall "below 7 to the dollar, which is a psychologically significant threshold," Krueger said.