In the last several days, that pessimistic story has become more real.

On Thursday, President Trump said he would place 10 percent tariffs on $300 billion in Chinese goods, ending a period in which there seemed to be some easing of tensions between the two nations. On Monday, the Chinese government allowed its currency to fall below a symbolically important seven-to-the-dollar level, an apparent retaliatory move that amounts to trade tensions spreading into another arena. The United States returned fire by formally naming China a currency manipulator.

The swings in financial markets Monday are hard to justify in narrow terms. A slightly cheaper Chinese currency shouldn’t have huge consequences for the global economy. Rather, investors are coming to grips with the reality that the trade war is escalating and spreading into the global currency market.

While the drop in the stock market gets the attention — the S&P is down 5.8 percent in the last week — it is global bond markets that are flashing the most worrying signs about the outlook for growth in the United States and much of the world. Ten-year Treasury bonds yielded 1.72 percent at Monday’s close, down from 2.06 percent a week earlier — a sign that investors now believe that weaker growth and additional interest rate cuts by the Federal Reserve are on the way.

“The Chinese have sent a strong signal that they are ready to rumble,” said Paul Blustein, a senior fellow at the Centre for International Governance Innovation and the author of “Schism,” a book due out next month about the fraying relationship between the United States and China. “To depreciate the currency at such a fraught time sends a signal that they are prepared to endure a heck of a lot of pain, and it doesn’t surprise me that markets would finally come around and say, ‘This could be really bad.’”

As we’ve seen many times through this trade war, escalation and de-escalation can come at seemingly any time. President Trump could back away from his latest tariff threat and calm things down, or move the opposite direction by increasing the tariff to be charged on those $300 billion in imports from China. But one recurring theme of the last two years is that trade conflicts in the Trump era never seem to become fully resolved, but rather go through more-intense versus less-intense phases.