Full-blown trade war quickly shifting from risk to baseline | Fin24
Goldman Sachs, Nomura Holdings and JPMorgan Chase and Co. are among those that have rewritten their forecasts as US President Donald Trump threatens to impose a 25% tariff on around $300 billion of additional Chinese imports. Analysts at Nomura have made that hike in duties - which would mean practically all of China’s exports to the US are hit by tariff hikes - their baseline forecast. They see it as a 65% probability before year-end, and most likely to come in the third quarter.
Those duties would have a material hit to inflation and lift the core PCE price measure in the US by 0.6 percentage point, on top of the 0.2 percentage point already felt from tariff hikes. It would also, combined with limited Chinese retaliation, hit US GDP by 0.5% and Chinese GDP by 0.8% over a three-year period, Goldman’s team estimated.
JPMorgan analysts on May 17 said their new baseline is for the status quo - that is, all the rounds of tariff hikes to date from the two countries - staying in place well into 2020.
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