What Is The Market's “Worst Case” Scenario In All-Out Trade War: Goldman's Take

After confidently denying for months that there is a chance of an aggressive escalation in the US-China trade war, Goldman finally moved toward joining what has now become a virtual sellside consensus call that the feud between China and the US will become worse before its get better, when on Monday the bank said that “additional trade-related actions taken over the last several days further raise the risk of additional US tariffs on imports from China and further reduce the chances of a formal agreement at the June G20 meeting”, yet even then adding that “while there is substantial uncertainty, we believe the odds are slightly greater that further US-China tariff escalation is avoided. That said, this is a close call and without additional signs of progress over the next few weeks, implementation of the next round of tariffs on $300bn of imports from China (“List 4”) could easily become the base case.”

In light of the latest developments, which have seen the bilateral trade war mutate into a global tech war targeting various key Chinese companies, with Australia, New Zealand, the UK and Japan all siding with the US in refusing to supply Huawei with critical components effectively jeopardizing the continued existence of the Chinese telecom giant, it now appears that implementation of the 4th round of tariffs is virtually certain.

This, in turn, prompted Goldman last week to warn that a burst in US inflation is likely in the near future, since the final tranche of tariffs would affect mostly consumer goods…

Keep reading this article on Zero Hedge - Blog.

Leave a Reply