Having spent his first year in office basking in the luxuriant glow of the Dow Jones, it should be odd that Donald Trump would so carelessly disregard the market indicators flashing red over his latest flirtations with protectionism. Indeed, anxieties around the prospect of a trans-Pacific trade war are rippling through global markets after the mercantilist-minded president imposed new tariffs Thursday on as much as $60 billion worth of Chinese goods, in an effort to counter threats from a country the White House has dubbed an “economic enemy.” In addition to tariffs, the Treasury Department went one step further, announcing it would restrict Chinese investment in American technology firms. According to officials, China uses these firms to steal American talents, secrets, and skills to nurture its own “national champions.”

China’s response was blunt. “China does not want a trade war with anyone. But China is not afraid of and will not recoil from a trade war,” read a statement from its Washington embassy. “China is confident and capable of facing any challenge. If a trade war were initiated by the U.S., China would fight to the end to defend its own legitimate interests with all necessary measures.” Such necessary measures were swiftly introduced, with China set to implement its own trade barriers on as much as $3 billion worth of U.S. goods, specifically targeted at Trump-friendly farm-belt states.

But riling China has always been central to Trump’s strategy as president. Before he took office, he accepted a call from Taiwanese President Tsai Ing-wen, breaking with decades of tradition and enraging its mainland neighbor. More recently, the president signed the Taiwan Travel Act, legislation allowing high-level talks between U.S. and Taiwanese officials, which China called a “red line.” News of the tariffs, however, derailed years of structured dialogue between China and America, during which they have sought to reach agreements on various economic and security issues. In opting to instigate more extreme measures, Trump said that while he respects President Xi Jinping, he would not tolerate running a trade deficit of nearly $400 billion with China, the U.S.’s second-largest trading partner. To bolster its decision, the White House released a report on Thursday mapping a pattern of predatory behavior by the Chinese, such as forcing American companies to transfer technology and trade secrets, and “systematic” data theft through hacking of American computer systems.

Perhaps unsurprisingly, the prospect of a trade war between America’s capricious president and the increasingly authoritarian Xi, who recently moved to cement his role as probable president-for-life, has done little to reassure markets. The tough talk from both parties has had a tangible impact: as stocks in Europe tumbled for a third day, Asian markets were down more than 3 percent after China declared its retaliatory measures.

Investors may be spooked, too, by the sudden entrance of Trump’s third national security adviser, the tough-talking, war-loving John Bolton. A former U.S. ambassador to the United Nations, Bolton is the latest in a line of Fox News pundits to be funneled into the White House, and some worry his hawkish tendencies could turn the trade war into all-out conflict. As George W. Bush’s undersecretary of state for arms control, Bolton was firmly in favor of the invasion of Iraq, and his appointment is part of a wider staff shake-up that has cleansed Trump’s inner circle of those who opposed his instincts on North Korea, Israel, and the Iran nuclear deal. Until now, it had been reported that the trio of James Mattis, Rex Tillerson, and H.R. McMaster acted as a three-pronged brace on the president. Now, having ousted the latter two, and flanked by Bolton and Mike Pompeo, Trump is armed with one of the most aggressive national security teams of any White House in recent history.