U.S. President Donald Trump's trade war is heating up. Days after imposing tariffs on $34 billion worth of Chinese exports, with an additional $16 billion under consideration, the administration announced that it was also contemplating tariffs on an extra $200 billion worth of Chinese-made products.

Just over a month ago, Trump had also imposed punitive tariffs on steel and aluminum imports from such allies as the European Union, Mexico and Canada. They have retaliated, so did China and it has promised to continue retaliation should the United States impose more tariffs. Trump is betting that he can win this war. After all, China exports over $500 billion to the U.S., while the U.S. exports only $130 billion to China.

The effects of Trump's trade war will be material. First, punitive tariffs will raise the price of the goods affected. Retaliatory action by the EU, Canada, Mexico and China will do the same to their economies.