Goldman Sachs revised the possibility of an upsurge to the trade wars of US with Mexico and China.
The investment bank in Wall Street said on Monday that now there is a 60% possibility of US imposing a fresh 10% tariff on $300 billion Chinese imports. Previously it was estimated that there would be a rise of 40%. US President Donald Trump had said last month that tariffs on Chinese goods worth $200 billion would rise from 10–25%.
Now Washington has started analyzing whether the other imports from China worth $300 billion would also be subjected to increased duties. Goldman Sachs revised its possibility of a rise in the tariff on Mexican products as well. This suggested that there is a possibility of 70% that Trump would impose taxes on first 5% goods from Mexico and 50% possibility that it would rise to 10%.
Recently Trump had threatened Mexico that US would increase 5% tariffs on Mexican imports which would be implemented from June 10, except if the country could restrict the inflow of migrants to southern border of US. The note from Goldman said that the increase in the additional rate of tariff or auto tariff is possible but it is not their base case. The investment bank revised its chance of rise in auto tariffs that would be introduced in 2019 to 40% from the previous 25%.
Although Chinese and Mexican deals are expected to represent removal of tariffs, it isn’t expected until the end of 2019 or 2020.
The note had anticipated an escalation in the trade war between the countries along with a rise in drift between US and its southern neighbors which would take a toll on its growth. The analysts of Goldman had lowered their forecast of US GDP for second half of 2019 by 0.5% to 2%, but they are expecting that the growth would rebound relatively in 2020 with stabilized financial conditions and tariffs would succeed.