Japan’s economy risks taking another hit if US President Donald Trump slaps fresh tariffs on China, sparking a renewed US-China trade war, according the government’s chief economist.

Policymakers, investors and economists are watching Trump’s trade policy amid fears that his threatened use of tariffs could batter global commerce.

Investors are bracing for a potential trade war that could hit the earnings of major companies and dent global growth. Canada and Mexico have said that they will hit back with retaliatory tariffs while China promised to respond with "corresponding countermeasures" and vowed to challenge Trump's move at the World Trade Organization.