It was only three months ago that most Wall Street analysts expected that Trump’s trade war threat was just more jawboning from the unorthodox president, with those few who modeled a “worst case scenario ” – such as Barclays – projected that a 10% tariff on all US imports and exports would have a modest overall impact on the US stock market.

Not so anymore, because with the US set to slap a new, $200 billion round of tariffs on Chinese imports any minute, there is a new urgency in forecasting how bad trade war with China could get: after all, with the US economy humming for now, and with blockbuster corporate earnings, it’s the only risk variable moving the market day to day.

Today, after weeks of downplaying the threat of a “worst case scenario”, Goldman Sachs became the latest to weigh in on this topic, highlighting the potential danger to Corporate America if a full-blown trade war erupts. 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. For the die-hard BTFDers, Goldman also left an optimistic scenario which sees the S&P rising as high as 3,140 by the end of 2019.

For now, the US – if not global – stock market is taking trade war in stride, and the S&P500 rebounded on Wednesday after a another WSJ report that Trump would proposing a new round of trade talks with China in the near future. The counter argument is that that the higher the S&P rises, the more emboldened Trump becomes that he is winning the trade war and does not need to negotiate with China which will be forced to surrender sooner or later. Which is also why today’s olive branch to China came from Steven Mnuchin and not Trump himself.

Meanwhile, most analysts are convinced that the only event that could force Trump to sit down and negotiate with Beijing in earnest, is a sharp drop in the stock market. Ironically, until that happens, Trump will keep on “winning” the trade war, at least until the already record disconnect between the rest of the world and the S&P grows large enough…

… that the US stock market collapses under its own weight.

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