With the world's two largest economies opening a new front in their multibillion dollar bilateral trade dispute, the risk has risen sharply that the U.S. will eventually slap tariffs on all imports from China, Goldman Sachs said on Sunday.
President Donald Trump ordered a new raft of surcharges on around $200 billion worth of Chinese goods last week, with China retaliating with $60 billion in U.S. goods.
Last year, the world's largest economy absorbed more than $500 billion worth of goods from China, which reciprocated by taking in around $130 billion — a bilateral imbalance the Trump has vowed to rectify. With that in mind, Goldman suggested that all of China's goods and services crossing America's borders may be subject to tariffs in relatively short order.
"Following President Trump's threat of further escalation, we now think the probability that all imports from China will ultimately be subject to tariffs has risen to 60 percent," the bank's analysts wrote in a research note.
Even still, Trump has steadily worked toward finding points of convergence with other trading partners, such as Europe, Mexico and Canada, and those developments have heartened Goldman.
Although a top White House official said last week that the U.S. and Mexico are prepared to move ahead alone on a new trade agreement without Canada, the ongoing negotiations may be encouraging in and of themselves.
"On a more positive note, we have seen de-escalation on other fronts of the trade war, with a NAFTA deal likely by November and reduced trade tension with the EU," Goldman said on Sunday.