Markets were mixed on Monday.
While the S&P 500 rose 0.2 percent, the STOXX Europe 600 fell 0.2 percent and the Nikkei 225 tumbled 1.3 percent.
A meeting of G-20 finance ministers and central bankers ended on Sunday without resolving trade tensions between the US and other countries.
Instead, the officials warned in a communique that economies were threatened by risks that include “rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies”.
US investors have largely ignored the threat of a trade war though, as the US stock market again showed on Monday. The S&P 500 remains near its all-time high despite the majority of fund managers saying that they are concerned about it.
Goldman Sach thinks this complacency may be misplaced.
According to Goldman, a trade war would have minimal impact on earnings from reduced revenue but a large impact from reduced margins.
“Conservatively assuming no substitution to other suppliers or pass-through of costs, and no boost to domestic revenues or change in economic activity, a 10% tariff on all imports from China would lower our 2019 S&P 500 [earnings per share] estimate by 3%,” Goldman wrote. “If tensions spread and a 10% tariff were implemented on all U.S. imports (highest rate since 1940s) our EPS estimate would fall by 15%.”
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