Goldman Sachs: Here’s China’s likely next step to Trump’s new trade threat

U.S. President Donald Trump’s latest threat to slap elevated tariffs on Chinesegoods will likely push Beijing to ramp up stimulus in order to shield its economy from additional harm, a Goldman Sachs strategist said on Friday.

Trump on Thursday said Washington will apply 10% tariffs on $300 billion of Chinese goods starting Sept. 1. That’s in addition to the $250 billion of Chinese goods already subject to a 25% U.S. tariff — which Beijing had retaliated to by imposing elevated levies on billions of dollars of American products that it imports…

The U.S. and China — the two largest economies in the world — have been engaged in a trade war over the past year which has affected investor sentiment and business confidence. With heightened uncertainties overseas, China will have to support its domestic economy to achieve its growth target of 6% to 6.5%, said Timothy Moe, co-head for Asia macro research and chief Asia Pacific equity strategy at Goldman Sachs.

China’s gross domestic product growth in the first six months of this year was 6.3%, official data showed.

“We do think that one of the actions that China would likely take … is to continue with stimulation of the domestic economy,” Moe told CNBC’s “Street Signs.”

“The external side has been weak and that has obviously been exacerbated by the U.S.-China trade friction. So, in order to offset that negative effect from the external side of the economy, there needs to be corresponding investments or activity which support domestic demand,” Moe added.

Beijing has introduced a series of measures such as…

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