Janet Yellen stepped to the podium a year ago this week in Beijing to deliver a reassuring message. The U.S. doesn’t want to decouple from China, the then-U.S. Treasury secretary said. "Our two economies are deeply integrated, and a wholesale separation would be disastrous for both."

Twelve months on, U.S. President Donald Trump’s more than 120% tariffs on Chinese goods and Beijing’s determination to fight back in kind mean the seismic cleavage Yellen warned of is rapidly becoming a reality. About $19 trillion has been wiped off the world’s equity markets since the S&P 500 Index closed at a record high on Feb. 19, and this week’s selloff in Treasuries is the worst since the pandemic. Economists have rushed to price in a U.S. recession as Washington and Beijing engage in a dangerous bout of economic brinkmanship.

The White House says Trump "has a spine of steel and will not break.” On Wednesday he ratcheted up pressure on China, raising the import duty to 125%, even as he announced a 90-day pause on reciprocal tariffs for dozens of other trade partners. Beijing, meanwhile, has vowed to "fight to the end.” Earlier on Wednesday, it responded to Trump’s previous move by raising Chinese tariffs on U.S. goods to 84%, making it clear to all that Chinese President Xi Jinping is in no mood to cave.