The Winners And Losers From The Escalating US-China Trade War

The winners

However, some assets are likely to emerge as clear winners from the situation, namely those that offer defensive characteristics.

Apart from cash, gold, which has seen a strong rally already this year, is reaping the benefits of a flight to safely.

Lukman Otunuga, research analyst at ForexTime Limited, said: "Gold will remain one of the prime destinations of safety amid trade tensions and global growth fears. The precious metal is already trading at a six-year high above $1,473 [as of Tuesday 6 August]."

At the same time, the Japanese yen and the euro should reap the benefits of the potential currency war, according to George Efstathopoulos, multi-asset portfolio manager at Fidelity International.

He believes "the euro could be one of the biggest beneficiaries, bringing an end to 18 months of depreciation against the US dollar".

Another beneficiary could be Chinese bonds if the PBoC is forced to announced monetary policy easing to try and ease the impact of US tariffs on the economy.

Luc Froehlich, global head of investment directing, fixed income, at Fidelity said: "The reality is that China might be already moving more decisively towards further monetary policy easing to counter growing pressure from the most recent tariffs, which are weighing on business sentiment, as well as from the constraints imposed on Chinese developers' funding. Both these dynamics have been restraining the government's ability to stimulate its economy.

"The renminbi weakening is potentially a sign of the PBoC's growing appetite for a broad-based easing, which could help Chinese bonds finally catch up with the rally among global peers."