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Trump-China trade war escalation likely at G20, Goldman Sachs says

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Trump Xi trade war
Goldman
Sachs sees trade war ‘escalation’ as the most likely outcome of
the G20 meeting.

AP/Saul
Loeb



  • A note from Goldman Sachs on Friday argues that the
    most likely outcome of the G20 meeting is that trade tensions
    escalate further, with Trump moving to impose tariffs on all
    Chinese goods sent to the US.
  • President Donald Trump heads to Argentina for the G20
    summit, and trade talks with Chinese leader Xi
    Jinping. 
  • Goldman Sachs sees over a 50% probability of trade war
    escalation. The meeting between the two is set to be a
    crucial moment in the trade conflict between the two
    nations.


  • To read more about Trump’s trip to Argentina, read Business
    Insider’s comprehensive preview of the meeting.

President Donald Trump and his Chinese counterpart Xi Jinping

will meet on the sidelines of the G20 summit in Buenos Aires,
Argentina this weekend
, in what is among the most widely
watched bilateral meetings of 2018.

There have been tentative signs that a deal may be struck, but
according to analysts at Goldman Sachs, the most likely outcome
of the meeting is that the trade war actually escalates.

“We currently see ‘escalation’ as the most likely outcome in the
next few months, with slightly over a 50% probability,” the
note from a Goldman team led by Andrew Tilton said.

That scenario, according to the report, would mean
tariff rates rise to 25% on all imports currently under
tariff, while tariffs are extended to remaining Chinese imports.
The other, less likely, near-term scenarios Goldman Sachs
outlines in the note are a ‘pause,’ and a ‘deal.’ 

“The chances of a comprehensive deal are pretty low
in the near term (10%), though rising over the course of 2019,”
the bank said. “By late 2019, however, we think it is likely we
will have at least reached a ‘pause.'”

On the line is the future of global trade, with a positive
meeting likely seeing a deescalation of the trade conflict
between the two countries, and a negative one threatening to see
the start of a
full blown trade war.


Read more:
Trump claims car companies are ‘pouring’ into the US. The reality
is a lot more troubling

As it stands, tariffs have been levied by the Trump
administration on around half of all Chinese goods imported to
the USA, with a value of about $250 billion. China has imposed
retaliatory tariffs on around $110 billion of US goods.

An unsuccessful meeting, however, could see that number
double, with the US levying tariffs on all $500 billion or so of
Chinese goods that come into the USA each year. 

In such a scenario, China has threatened to retaliate in
kind, placing levies on all goods imported from the US.



Tariffs

Goldman
Sachs

The pause scenario, Goldman says, means:

existing tariffs remain in place but the two sides
agree to keep talking with escalation put on hold,” the analysts
wrote.

And the deal: “which we think is unlikely in the near term,
would involve complete rollback of the current tariffs.”

The assets most sensitive to the trade outcome are likely
to be the renminbi and equities, Goldman Sachs said. 

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