Trump To Proceed With $200BN More In China Tariffs Despite Talks; Stocks, Yuan Tumble | Zero Hedge
Earlier this week, Goldman became the latest to weigh in on the topic of trade war, highlighting the potential danger to Corporate America if a full-blown trade war erupts, one which now appears inevitable. And in a radical departure from his traditional optimism, Goldman chief strategist David Kostin went so far as now calling for a bear market, with the S&P dropping 25%, resulting in over $6 trillion in market cap losses, should the U.S. impose 10% tariffs on all imports.
In a sensitivity analysis evaluating a baseline case, as well as a moderate and severe trade war, Kostin predicts that a 25% tariff imposed just on Chinese goods would wipe out growth for S&P 500 companies next year, keeping S&P500 EPS flat at $159. In the extreme case – the one which Barclays evaluated back in June – and in which the U.S. imposed 10% tariffs on all global imports, earnings would drop 10% as costs went up for Americans while crushing corporate profits.
In addition to hammering earnings, Goldman also expects that the PE multiple of the S&P would also contract, dropping from the current 17x to 15x, and resulting in an S&P plunge of 25% from the current 2,888 to 2,200, which would lead to a bear market and wipe out over $6 trillion in market capitalization.
AGR; a full fledged trade war resulted in the Great Depression the last time it was tried. Is Trump going to go all in, or dance around the edges of a black hole of financial apocolypse?