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So much for any hopes that the resumption of U.S-China trade talks would put an end to the tariff war in anything like the near term. The new round of talks only began on Wednesday, was adjourned after a day, and was scheduled to resume in Washington in September.

This morning, though, President Donald Trump abruptly ended the truce in effect since his meeting with Chinese President Xi Jinping at the end of June by announcing that he would impose a 10% tariff on an additional $300 billion in Chinese imports that aren’t yet subject to U.S. duties. The new tariffs will begin on September 1.

And this round, economists are saying, will hit U.S. consumers harder than the previous 25% tariffs on $250 billion of Chinese goods (which will remain in place.) The draft list of goods published in May subject to the 10% tariff in September includes consumer and technology goods inducing Apple’s iPhone, toys, footwear and clothing.

These comments published on Bloomberg give a good taste of the reaction. “These are the tariffs on many of the consumer goods that were spared in the previous tariff rounds,” said Neil Dutta, head of economics at Renaissance Macro Research in New York, in a note. “This is a small hit to growth but will likely be more obvious to consumers. Keep in mind that margins have come in somewhat already, not sure firms can simply eat the cost.” And from Arthur Hogan, chief market strategist at National Securities: “Any way you slice it, escalations of the whole megillah, meaning the additional $300 billion starting with 10%, means it’s only going to get worse and that’s going to be a defining moment in this trade war where it starts showing up with the consumer.”

As usual in this trade war, it’s not clear what provoked the move or what the White House strategy might be. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer returned from talks with Chinese counterparts in Shanghai this week without reporting much progress so is this an attempt to raise the stakes in order to wring concessions from China? The timing is particularly puzzling since after that day of talks in Shanghai both sides confirmed they had discussed increasing Chinese imports of U.S. agricultural products, which have fallen dramatically this year. In his tweet today President Trump also called out China and President Xi by name as having failed to meet a promise to crack down on U.S. shipments of fentanyl, a dangerous opioid.“Many Americans continue to die,” Trump said in a tweet.

The market reaction has been savage in the bond market. The yield on the 10-year Treasury fell to 1.89%, a drop of 13 basis points from yesterday’s close. The yield on the 2-year Treasury slid to 1.71% from 1.87% yesterday. That moves the yield curve extremely close to the kind of inversion (where long-term yields are lower than short-term yields) that often signals a recession. The two Treasury ETFs that I have added to portfolios recent were up today with the Vanguard Short-term Treasury ETF (VGSH) climbing 0.28% and the Vantage Intermediate-term Treasury ETF (VGIT) gaining 0.80%.

Other risk hedges also climbed with gold, for example, gaining 0.93% to $1451 an ounce. The Gold Shares ETF (GLD) that I hold in several portfolios was up 1.82%. Other hedges in my portfolios also climbed with share of Barrick Gold (GOLD) up 4.00% as of 2:30 p.m. in New York. Shares of silver miner First Majestic Silver (AG) gained 4.14%. Wheaton Precious Metals (WPM) gained 2.60%.

On the other hand, oil fell hard with U.S. benchmark West Texas Intermediate sliding 8.01% to $53.89 a barrel. International benchmark Brent dropped 7.18% to $60.38 a barrel.

Stocks also dropped on the tariff news. The Standard & Poor’s 500 was lower by 0.64% at 2:30 p.m. New York time. The Dow Jones Industrial Average was down 259 points or 0.73%. The NASDAQ Composite retreated 0.50% and the small cap Russell 2000 got walloped, losing 1.61%.

My conjecture on why some assets have been hit harder than others runs like this: The bond market knows that the the U.S. Treasury yesterday announced record bond sales in coming months. (See my post on Treasury sales from late last night.) Might China decide not to buy? Or at least not to buy as heavily? On the other hand, this tariff news is big news so many traders and investors have fled to the liquidity of the Treasury market. Bigger companies will be better able than the smaller companies in the Russell 2000 to eat the higher costs from the tariffs rather than passing all of them on to consumers and watching sales plunge as consequence.

I also find confirmation in this trade twist of my conclusion that the Trump administration doesn’t intend to settle this trade war until sometime after the November 2020 elections.