As the news emerged, last week, that trade talks between the United States and China had broken down, and the Trump Administration was moving to raise tariffs on hundreds of billions of dollars’ worth of imports from China, Donald Trump took to Twitter to promote an alternate reality. He argued that higher import duties don’t represent an additional cost to consumers and a drag on over-all economic activity, as the economics textbooks say, but are, in fact, good for the economy.

“I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers...great for U.S., not good for China!” Trump tweeted last Wednesday. On Friday, he reiterated the message, saying, “Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!” And this Monday morning, he added, “The unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China. Some people just don’t get it!”

He’s right about that. Nearly all economists, including some who work for him, believe that tariffs are costly to the economy, and that American consumers will bear at least some of the burden as the Trump Administration raises the tariff rate from ten per cent to twenty-five per cent on thousands of imported Chinese products, including glassware, motorboats, vacuum cleaners, and metal doors and windows. When Larry Kudlow, Trump’s top economic adviser, appeared on Fox News on Sunday, the host Chris Wallace pointed out that tariffs are, in effect, taxes that are often passed on to consumers as higher prices. “Fair enough,” Kudlow replied. “In fact, both sides will pay. Both sides will pay in these things.” Evidently, Kudlow didn’t explain this to his boss, or Trump didn’t listen.

Kudlow also argued that it is worth bearing the short-term pain of a trade war to force China to open up its vast economy to American firms on a fairer basis. Conceivably, Trump could make this case, too—and, if he did, he would have a good deal of support from U.S. business leaders and even some Democratic officials. But instead he has promoted the fiction that trade wars are painless and easy to win. In his Monday-morning tweets, he insisted, “There is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today.” He went on to suggest that Americans could “by [sic] from a non-Tariffed country” or “buy the product from inside the USA (best idea.) That’s Zero Tariffs.”

Doubtless, Trump will be taking his own advice. He could begin by trying to buy himself a shiny new iPhone XS on which to bash out more pearls of economic wisdom. Unfortunately, he won’t be able to find one that isn’t made in China. If he goes ahead with the purchase anyway, and his Administration follows through on its threat to widen its tariffs to all Chinese imports, not just the ones currently targeted, he could end up paying an extra hundred and sixty dollars for the new phone, which currently costs about a thousand dollars, according to Morgan Stanley. Apple assembles practically all of its iPhones, iPads, and other products in mainland China, as do many other U.S. companies. Even if these firms took Trump’s advice and tried to shift production to other countries, or to the United States, it would take them months or years to do it.

After he settles on a pet theory, he’s largely oblivious to reason, and can only be shifted by brute force—the sort of force that can only be applied by sharply falling approval ratings, or, even more potently, sharply falling stock prices. You only have to glance at Trump’s Twitter feed to know that he is obsessed with the stock market and believes it is a key to his political appeal. Here’s a somewhat random example from last Friday: “The average 401(k) balance has SOARED since the bottom of the market - 466%. Wow!”

He shouldn’t have tempted fate. On Monday morning, shortly after he said that China shouldn’t retaliate against his Administration’s latest moves, the Chinese government announced it would do just that. The tariffs it imposes on a range of U.S.-made goods—including vegetables, beer, and liquified natural gas—would be raised significantly, the Chinese foreign ministry said. If the timing of this announcement, which came just before the opening bell on Wall Street, was intended to spook American investors, it worked. As soon as trading started, the Dow plunged almost five hundred points from the previous close, and fell further from there. At the end of the trading session, it was down six hundred and eighteen points—or about 2.4 per cent—at 25,325.

By itself, this wasn’t an earth-shaking development. Since the start of 2019, the Dow has risen sharply, and even after Monday’s fall it is up by about eight and a half per cent. But it has also fallen about four and a half per cent in a week. That’s a significant move, and it indicates that investors are reappraising their optimistic view of the future in light of Trump’s revving up of his trade war. If both sides now dig in—no further negotiations have been scheduled—the sentiment in the market could turn even more sharply negative, producing more days like Monday.

It is largely about expectations. In recent months, financial markets around the world have rallied on the basis of three beliefs: the Federal Reserve wouldn’t raise interest rates any further, the United States and China would resolve their differences over trade, and the world economy would rebound from a significant slowdown last year. The renewed threat of an all-out trade war between Washington and Beijing undermines the last two of those beliefs and renders the first one moot.

That’s obviously worrying news for the economy over all, as well as for investors and purchasers of goods made in China. Just how big the hit could be depends on what happens next. Over the weekend, economists at Goldman Sachs and UBS estimated that, on a stand-alone basis, the impact of the new tariffs would be relatively small: a reduction in G.D.P. of less than half a percentage point. But both studies pointed to the risk of further escalation evident in Trump’s threat to broaden tariffs to all Chinese imports. (On Monday, he said he hadn’t decided to go through with this move.) “If we move into that next tranche of tariffs, we are one hundred per cent in uncharted territory,” Rob Martin, an economist at UBS, told the Times. The Goldman Sachs analysis warned of another danger, too. It said that “if trade tensions sparked a major sell-off in the equity market the growth impact could worsen considerably.”

Trump didn’t immediately react to Monday’s fall in the stock market. He did reiterate his plans to meet with Xi Jinping, the Chinese leader, at next month’s G20 summit, in Osaka, Japan. But that summit isn’t for another six weeks, which is a long time for fast-moving financial markets. And for Trump, despite his best efforts to avoid it, reality is already biting.