IN THE original Godzilla movie, made in Japan back in 1954, the testing of American nuclear weapons leads to the creation of a giant dinosaur that threatens to destroy not just Japan, but the rest of the world. Now Asians face another American creation that seems to be laying waste to all around it.

President Donald Trump has already pulled out of the TPP (the Trans-Pacific Partnership) and the Paris climate change agreement. Now he appears determined to roll back the international trade arrangements that have been in place since 1945. Yesterday’s announcement of tariffs on $60bn of Chinese trade threatens to launch a trade war between the world’s two largest economies (the Chinese have already suggested retaliatory measures). Small wonder that Asian markets have taken a hit today (March 23rd); Japan’s Nikkei was down 4.5%, China’s Shanghai Shenzhen dropped 2.9%; Hong Kong’s Hang Seng 2.5%. European markets have opened nearly 2% lower.

All this could be bluster. Godzilla, after all, is usually subdued by the end of the film. The recent announcement of tariffs on steel and aluminium imports has been followed by a wide list of exemptions including the EU. Mr Trump’s strategy seems to be to threaten and then to withdraw those threats in return for small concessions from the other side. That way, he gets kudos from his political base without causing any economic damage.

On the other side of the Pacific, Elsa Lignos of the Royal Bank of Canada says that “China will opt to under- rather than over-react.” Capital Economics, a consultancy, says the damage to the Chinese economy from the tariffs will be only 0.1% of GDP. 

But that was not the only thing Mr Trump did yesterday. He appointed John Bolton as his third national security adviser in 14 months. Mr Bolton, a noted hawk, argued the case for a first strike on North Korea less than four weeks ago. Ms Lignos views this appointment as “a more rational concern” than a trade war. Citigroup concludes that, together with the tariffs, “These developments unambiguously raise short-term market risks.”

Bluster or not, investors are understandably concerned. Just two months ago, virtually none of the fund managers polled by Bank of America Merrill Lynch picked a trade war as the main market risk; in the latest survey, it tops the polls at 30%. It is not difficult to imagine a scenario  in which things go rapidly downhill from here. Investors have been dismissing the bearish implications of a flattening yield curve (often a sign of recession) and the widening gap between the Libor rate and the swap rate. But they should worry about the very high valuation of the American stockmarket. And they should be concerned about the apparent end goal of Trump’s strategy—eliminating the trade deficit. The recent tax cuts will widen, not reduce it, as the US sucks in more imports; tariffs will make little difference. The most likely route for eliminating the deficit wouild be a recession in which the US lost its appetite for imports; not something markets (let alone the voters) would welcome. 

Nor should they generally welcome a situation where Mr Trump’s tactics are deemed to be successful. That might only encourage further rampages. After all, there have been 31 Godzilla movies so far.