Goldman Echoes JPMorgan in Predicting Higher U.S. Tariffs on China

(Bloomberg) --

Goldman Sachs has a message for traders clinging to the hope that U.S. and Chinese negotiators will reach an eleventh-hour solution before the trade war escalates at midnight on Friday: Don’t bet on it.

U.S. markets gyrated on Wednesday as investors grappled with conflicting headlines on whether the trading relationship between the world’s two largest economies will truly take a turn for the worse.

President Donald Trump tweeted that Chinese Vice Premier Liu He is coming “to make a deal” and White House Press Secretary Sarah Sanders said the U.S. received “an indication’’ that China is ready to resolve this fraught affair. Soon after, China’s Ministry of Commerce said the world’s second-largest economy was already preparing retaliatory countermeasures in the event that the U.S. upped tariff rates.

It’s a “close call,’’ writes Goldman analyst Alec Phillips, a former Senate Finance Committee staffer, who judges that there’s a 60 percent chance higher tariffs rates will go into effect.

Goldman Echoes JPMorgan in Predicting Higher U.S. Tariffs on China

In an interview on Bloomberg TV, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon agreed that he didn’t think the two sides would get the deal done by Friday.

Goldman doesn’t expect trade talks to devolve much further. Phillips views the likelihood that tariffs are applied to the final round of $300 billion of Chinese imports as one-in-four, and just a one-in-10 chance that auto tariffs are announced on Canada and Mexico, as this would scuttle the odds of the passage of a renegotiated trade pact among the three North American countries.

Trump announced via Twitter over the weekend that the levy on $200 billion in Chinese imports would rise to 25 percent on May 10, citing a lack of progress in negotiations between the two sides. U.S. Trade Representative Robert Lighthizer echoed the president’s remarks after the close of trading on Monday.

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