Goldman Sees Higher Odds for Continued U.S.-China Stalemate
Goldman Sees Higher Odds for Continued U.S.-China Stalemate
(Bloomberg) -- Fresh trade moves in recent days -- including the Trump administration’s actions toward foreign communications technology in general and Huawei Technologies Co. in particular -- are boosting the risk of more U.S. tariffs on imports from China, while trimming the chances for a formal deal at the June G-20 meeting, according to Goldman Sachs.
“The odds of a continued stalemate have risen, we believe, as have the odds of additional tariffs,” Goldman economist Alec Phillips wrote in a note.
Goldman outlined four potential outcomes. The most probable would be “little progress” ahead of the G-20 summit, though President Trump and President Xi meet, and then “emerge with an understanding that talks will continue and additional tariffs will be delayed, at least for a short period.” Phillips noted that some of Trump’s face-to-face meetings with other leaders have “led to positive outcomes amidst increasing tensions,” and added that the next round of tariffs may hurt more domestically than earlier rounds.
The next-likely outcome would be Trump and Xi making little progress at the G-20 meeting, and tariffs taking effect in July.
Another scenario would be implementing a round of tariffs in late June, which would probably scuttle an expected Trump-Xi meeting. “While technically possible, this seems fairly unlikely,” Phillips said.
The least-likely scenario would be talks resuming in the near term, and laying the groundwork for a formal deal at the G-20, he said. Phillips noted no meetings between U.S. and Chinese trade officials have been announced. “The tone of rhetoric that political leaders in both countries have adopted also suggests that it will take time to restore the US-China relationship to where it was prior to the breakdown in talks, let alone to reach the point where a detailed agreement can be finalized,” he said.
On Wednesday, Treasury Secretary Steven Mnuchin said the Trump administration is keeping watch on how tariffs on Chinese products will affect prices of consumer goods. Mnuchin said he’s spoken with Walmart Inc.’s chief financial officer, who has warned that duties on Chinese imports will raise prices.
Shares of Walmart rose as much as 1.2% in Wednesday trading. U.S. stocks broadly declined as trade tensions simmered, with the S&P 500 falling as much as 0.5%.
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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