US-China Trade War Risk Cools, Goldman Sachs Predicts De-escalation

Washington and Beijing are likely to pull back from escalating trade tensions following threats of increased tariffs and export restrictions, according to an analysis released today by Goldman Sachs.

The investment bank anticipates both sides will de-escalate their most aggressive stances and resume negotiations, potentially leading to an extension – possibly indefinite – of the tariff-pause agreement reached in May. This comes after President Donald Trump threatened a 100% tariff on Chinese imports in response to Beijing’s curbs on rare earth exports. The global economy is heavily reliant on Chinese rare earths, making a full-scale trade war damaging to both nations.

Goldman Sachs analysts suggest Trump’s tariff threat and Beijing’s export restrictions are likely bargaining tactics rather than immediate policy implementations, aiming to leverage negotiations and protect technological advantages. They foresee a period of “managed confrontation,” characterized by sustained political pressure but avoiding major economic disruption. Further details on the complexities of international trade can be found at the World Trade Organization.

The assessment indicates a reduced immediate risk of tariff escalation, which could positively impact risk assets and commodity markets sensitive to rare earth supply. However, uncertainty regarding long-term trade policy and tech-sector supply chains remains. You can read more about the impact of rare earth elements on technology here.

Officials have indicated a willingness to continue dialogue, but no specific timeline for renewed negotiations has been announced.