LONDON/BEIJING - Nomura analysts see a high likelihood that further negotiations between the United States and China will be needed before a final trade deal is reached, dragging out a dispute between the world’s two biggest economies that has kept investors on edge.
“At this point, we think that both the Trump administration and the Chinese government will have a hard time backing down from the negotiating positions they have laid out in the last few days,” analysts at the bank said.
Nomura sees a 10 percent possibility of the U.S. and China coming to an agreement on a comprehensive trade deal this week, and a 5 percent chance that negotiations “completely break down.”
The bank said there is a 45 percent chance new tariffs on Chinese imports threatened by U.S. President Donald Trump will go into effect Friday and negotiations will continue thereafter, and a 40 percent chance the U.S. postpones the tariffs and talks continue.
Ratcheting up pressure just hours ahead of talks in Washington, China vowed Thursday to retaliate if Trump goes ahead with more tariff hikes in the dispute over trade and technology.
Beijing will be forced to impose “necessary countermeasures” if the increases take effect Friday as planned, the Commerce Ministry said. It gave no details of possible penalties.
Trump threw global financial markets into turmoil with his threat Sunday to raise import duties on $200 billion of Chinese goods, from 10 percent to 25 percent. The U.S. president complained talks were moving too slowly, and said that Beijing was trying to backtrack on earlier agreements.
“China deeply regrets that if the U.S. tariff measures are carried out, China will have to take necessary countermeasures,” China’s Commerce Ministry said in a statement.
Stock markets fell for a third day Thursday after the volley of threats reignited jitters about global economic growth.
The Nikkei 225 stock average extended declines Thursday, falling 0.9 percent to mark its lowest close in about six weeks.
If talks break down and the tariff hikes go ahead, “risks of a financial market collapse, extreme risk aversion and sharp slowdown in global growth will spike,” Philip Wee of DBS Group said in a report.
Before this week’s acrimony both sides had said negotiations were making progress, which had helped to stabilize financial markets. But economists warned a deal might be further away than investors hoped.