This may be the point at which investors have to start taking President Donald Trump’s trade wars much more seriously.

Fears about trade have at times weighed on stocks since mid-February when the Trump administration announced tariffs on steel and aluminium. But the S&P 500 is up nearly 9% this year, and much of that increase has come in the past two months, a move that took the stock market to a record high last week.

The trade conflict between the United States and China may be on the verge of a sharp escalation. Bloomberg on Thursday reported that Trump wants to soon go ahead with tariffs on $200 billion of Chinese products, adding to those already imposed on $50 billion of goods.

Investors may have viewed Trump’s sharp rhetoric and threats since February as negotiating tactics and believed that he will be content with limited gains. That appeared to be the case over the past week, in which the White House worked toward a trade deal with Mexico and Canada that does not appear to radically remake the North American Free Trade Agreement (NAFTA).

But there has been unease among many investors. Fund managers have ranked trade as their primary concern over the past few months, and as Trump’s rhetoric has turned into action, some have positioned their investments for slower economic growth.

Although last week’s NAFTA negotiations sparked a rally in stocks, investors might not want to draw too much from the talks. Mexico and Canada are predisposed to compromise, given their huge dependence on the US market. And the European Union, which typically takes a hard line in trade negotiations, has not agreed to anything yet.

While China relies on the US market, its leaders can offset the impact of $250 billion of tariffs by measures like stimulating their economy and bolstering exports by letting China’s currency slide.

China also could step up its retaliation against the United States, which may hurt US companies.

That could put the stock market’s gains this year at risk. This summer’s rally has made stocks more expensive, which in turn makes them more vulnerable to negative news.

How far could stocks fall if the trade conflict intensifies?

Underlying stock market numbers give some guidance. The S&P 500 is now trading at 17 times earnings that analysts expect over the next 12 months, according to figures from FactSet. The lowest valuation on the index during the trade tensions this year was just over 16 times expected earnings. The benchmark would have to fall more than 5.5% to trade at that lower multiple.

A moderate market reaction to a stepped-up conflict with China may be justified given the uncertainty surrounding the negotiations. But any sign that the conflict could hit corporate earnings would deepen worries about future profits. If the great earnings boom that has recently driven stocks to new highs falters, the S&P 500 would be at risk of a steep decline.

Investors may comfort themselves with the thought that Trump may not want to risk a stock market rout before the US midterm elections. After all, he likes to trumpet the stock market’s nearly 30% ascent under his administration. On Thursday he tweeted, “For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!"

Investors now have to decide whether a much nastier fight with China fits into that bullish narrative.