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Just a few weeks ago, it seemed like everyone was willing to dismiss Donald Trump’s trade threats as “Art of the Deal”-style negotiating tactics. Not lately.

Fidelity International and Thomas Miller Investments Ltd. have cut equity holdings amid growing tensions between the world’s two largest economies. Declines in global shares have accelerated as U.S. President Trump threatened tariffs on European cars and another $200 billion of Chinese goods, in addition to levies set to take effect next week.

“It may well be that everyone eventually comes to their senses and the rhetoric comes down a bit, but as investors we have to work on the basis of probability,” said Abi Oladimeji, chief investment officer at Thomas Miller, which has cut stocks and boosted cash and alternative assets recently. “Miscalculations can happen. In that scenario it’s hard to see how anything that approaches a full-blown trade war will not be damaging for economic prospects.”

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Global stocks listed Monday, with the S&P 500 dropping 1.6 percent, the biggest retreat since April, while benchmarks in Europe lost as much as 2.5 percent. The outbreak of a trade war -- a worst-case scenario still seen as unlikely -- would roil global markets. After decades under a free-trade regime, even the most veteran investors have little experience in dealing with the fallout from protectionism. China and the European Union warned that unilateral trade barriers could push the world into a recession.

For now, markets are still far from a meltdown, but losses are building. Major equity markets are all down on Monday, with Europe’s Stoxx 600 reaching levels not seen since late April.

“Europe is quite a cyclical market and quite an export-driven market, so more than some other areas, it’s quite susceptible to a slowdown in global economic growth,” said Toby Gibb, London-based client portfolio manager at Fidelity International, which oversaw $324.5 billion of as of March 31. “This sort of rhetoric is likely to continue over the summer at least up till U.S. mid-term elections.”

Fidelity has turned neutral on equities from overweight, and added to its cash and bond holdings, he said. Equity funds saw $13 billion of outflows globally in the week through June 20, Bank of America Corp. said in a report, citing EPFR Global data.

While there are stocks that may do better amid rising trade tensions -- Gibb suggests some U.S. tech shares, where Oladimeji points to defensive sectors or U.S. producers that benefit from trade barriers -- both investors say stock losses will be broad-based.

And it’s not just trade. The U.S. is still set to continue tightening monetary policy. Economic data in Europe have disappointed this year, with a gauge of German business confidence resuming its decline this month in a sign the trade rhetoric is starting to affect companies.

Markets may be too used to political crises being resolved at the last minute or too confident that no reasonable politician would want a trade war, said Oladimeji at Thomas Miller.

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“Investors may be at risk of being complacent,” he said. “The probability of it may be small, but the impact may be quite significant.”

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