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GOLDMAN SACHS VIEWS TRUMP'S INITIAL TARIFF RHETORIC AS RATHER GENTLE

Contrary to initial expectations, U.S. President Donald Trump did not immediately impose tariffs following his inauguration, with Goldman Sachs viewing his stance as gentler than initially anticipated.

He did indicate a few hours later that he would consider a 25% duty on imports from Canada and Mexico from Feb. 1.

But economists at Goldman now see the chances of a universal tariff being applied this year to 25%, down from about 40% seen back in December.

The brokerage views it as a risk, but not its base case.

They considered Trump's stand on China as less hawkish than during the presidential campaign or even his comments since the election in November.

While they still see a roughly 20 percentage point tariff hike on imports from China as their base case, they trim the chances of it happening down to 70% from 90%.

In a presidential memo, Trump called for the U.S. Trade Representative (USTR) to assess China's performance under the "Phase 1" trade deal he signed with Beijing in 2020 to end a nearly two-year tariff war.

During his campaign, Trump had vowed to impose steep tariffs of 10% to 20% on global imports into the U.S. and 60% on goods from China.

Trump's said he could hit Canada and Mexico with duties over illegal immigrants and fentanyl crossing into the U.S., but Goldman believes the chances of this happening are still only around 20%. Goldman noted that in 2019, Trump said he would impose a tariff of up to 25% on Mexican imports within 10 days, but never did.

Markets, however, see it differently with both the Mexican peso MXN= and the Canadian dollar CAD= reeling overnight.

The president also revealed his plans to reverse the U.S. trade deficit with the European Union, either through tariffs or more energy exports. Goldman still sees a 55% chance of tariffs on regional automakers to materialise.

(Shashwat Chauhan)

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EARLIER ON LIVE MARKETS:

LUXURY BACK IN FASHION, WITH THREE FACTORS TO CONSIDER CLICK HERE

WELCOME TO TRUMP 2.0 - EUROPEAN AUTOS, RENEWABLES AND STEELMAKERS SLIDE CLICK HERE

BEFORE THE BELL: EUROPE HEADS SOUTH, WIND STOCKS EYED CLICK HERE

TRUMP'S BACK, SO IS VOLATILITY CLICK HERE