Goldman Sachs on what happens next on the trade war front

US President Donald Trump's threat of rising tariffs on Chinese goods is an indication that trade talks between the US and China "may have come to a problem," Goldman Sachs said.

The bank noted that the chances of a successful deal are now lower, but they suggest that the increase in tariffs can still be avoided - especially if the Chinese delegation is still present at a meeting with US negotiators this week.

Referring to Trump's latest gambit, Goldman's economists say, "This is a change from the upbeat US staff statement over the last few weeks, and suggests that the likelihood of a short-term deal is at least a little lower than it once looked."

In recent weeks, US officials have said trade talks are going well and sources have said the deal could be signed even this Friday. But it is argued that important points remain, such as intellectual property theft and disagreement as to whether tariffs should remain in force to ensure that Beijing will adhere to its commitments.

If the two countries are still meeting, the tariffs will really only increase if no consensus is reached by Thursday - before the tariffs come into force on Friday.

Goldman warns that this may signal a prolongation of the trade war: "If the upcoming meeting does not take place, then the agreement is unlikely in the coming week, so raising tariffs to 25% seems to be the most feasible scenario. "

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