Expect De-escalation And Concessions From Both Sides: Goldman Breaks Down The Latest US-China Spat, And What Happens Next

Goldman is out with a note from two of its top political economicsts, Andrew Tilton (HK based) and Alec Phillips, in which the two deconstruct the latest spat between the the US (mostly Trump) and China, and note that the key question for markets is whether the 100% tariffs proposed by Trump (in retaliation to the latest crackdown on rare earth exports) are ultimately implemented (if ever), with severe effects on global supply chains and especially high-tech production, or remain just efforts to gain negotiating leverage ahead of bilateral talks on the sidelines of the APEC meeting in South Korea later this month.

While Goldman leans toward the latter interpretation and expects that the ultimate resolution will be an extension of the current tariff pause past November 10 along with some new but limited concessions from both sides, "the recent policy moves suggest a wider range of outcomes than was the case ahead of prior US-China talks over the last few months."