New tariffs can cause the market to crash by 10%

Stocks may fall sharply if US-China relations deteriorate drastically, says Professor Jeremy Siegel of Wharton School.

Tensions between the two countries rose after Lighthizer's comments that the US could add new tariffs within 25% of this week. According to Siegel, this will significantly increase the risks to the markets and jeopardize the rally.

"If the negotiations are stalled and new negative consequences occur, the markets can fall by 10 to 20%," says Siegel. "The question is what will happen on Friday, if new tariffs are imposed then, what will the Chinese answer be?"

According to Siegel, the market has estimated 90% chance of trade dispute being resolved. After Trump's tweets on Sunday, threatening new tariffs, the market already estimates a 70% chance of finding a consensus.

Investors are already waiting to see China-US talks this week, and Donald Trump will definitely watch the markets.

"Trump's biggest trump cards for next year's elections are the economy and the markets, he can not afford a failure in both," says Siegel.

According to the professor, Trump could survive a small-scale sale if he eventually got out of a good deal. Meanwhile, however, most market participants do not like the rising volatility. The fear index - VIX - jumped 27% against a worsening sentiment.

Source: CNBC

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