As the tit-for-tat dispute between the U.S. and China resumes, fears of ‘material macroeconomic effects’ increase.

Just two days after Larry Kudlow, the new White House economic advisor, said President Donald Trump’s threatened tariffs against Chinese imports were just a negotiating ploy, which calmed financial markets, Trump upped the ante, causing panic once again.

Trump threatened to levy tariffs on an additional $100 billion worth of Chinese imports, on top of the $50 billion he had already planned.

That latest threat, plus an unexpectedly weak jobs report, sent stocks falling Friday, with the Dow Jones industrial average and S&P 500 both dropping more than 2%.

Analysts at Moody’s Investors Service say the latest proposed tariffs, which are “much larger in magnitude than the measures implemented so far ….  could carry more material macroeconomic effects if fully adopted.”

What’s been implemented so far are U.S. tariffs on $14.9 billion of Chinese exports to the U.S., representing 0.71% of total Chinese goods exports and 0.13% of Chinese GDP, according to Moody’s. The tariffs range from 10% on aluminum exports to up to 50% on washing machines.

China has responded by imposing tariffs on about $3 billion of U.S. exports, representing 0.21% of total U.S. goods exports.

Now Trump is threatening 25% tariffs on billions of dollars more of Chinese exports to the U.S., which creates “increasing uncertainty [that] will weigh on business investment and potentially on firms’ decisions on where to locate portions of global supply chains,” according to Moody’s.

The conservative Tax Foundation says a 25% levy imposed on $150 billion worth of imports from China “is equivalent to nearly $38 billion tax increase on American firms and consumers in 2018” and “could potentially claw back many of the benefits that businesses and households expected to see” from the sweeping tax overhaul passed in December.

S&P Global Ratings says the latest U.S. tariff threats draws China and U.S. “even nearer to an all-out trade war.”

What happens next will depend not only on what action the U.S. actually takes but also on China’s response.

In addition to the levies China has implemented so far, it has also initiated a World Trade Organization dispute resolution procedure over the U.S. tariffs on its steel and aluminum exports to the U.S., and it has proposed additional tariffs on $50 billion worth of U.S. exports to China. That represents 38% of U.S. exports to China, which leaves another “$80 billion worth of U.S. goods to China exports there not covered by China’s tariffs, yet,” write S&P Global Ratings analysts.

Federal Reserve Board Chairman Jerome Powell told the Chicago Economic Club on Friday that “tariffs can push up prices but it’s too early to say” what the ultimate impact will be until the tariffs are imposed. He said Fed policymakers discussed the U.S.-China tariff dispute at its last policy meeting in March and officials have heard from business leaders that trade policy has become “a bit of risk.”

“There is more bluster about trade than there is an actual full-scale trade war. But we are not sure,” writes David Kotok, chairman and chief investment officer of Cumberland Advisors in a recent market note. “These things progress, and history shows they worsen in a tit-for-tat manner. … The debate has raised risk premia in markets. When that happens, every investor and every business loses.”

Well, maybe not everybody. Investors in long-term U.S. Treasury bonds saw prices gain Friday as a result of the escalating U.S.-China trade dispute coupled with the weak jobs report, which showed payrolls rising by just 103,000. The yield on the 10-year Treasury note fell five basis points to close Friday at 2.78%.

But even that bullish flight-to-quality trade may fade. SGH Macro Advisors reports in its latest investment note, “From what we understand, the Chinese government has halted its purchases of US Treasuries … for the past few weeks.”

Since China is the single biggest foreign owner of U.S. Treasury securities — it held  close to $1.17 trillion of Treasuries at the end of January, according to Treasury data — a longer halt to purchases or the selling of Treasury securities could hurt prices. The latest data shows that China’s Treasury holdings as of January were at their lowest level since July 2017.