It would be one of the most expensive divorces in history putting Microsoft’s (MSFT) Bill Gates and Amazon’s (AMZN) Jeff Bezos to shame.
Tariff Tensions Heat Up
Goldman Sachs said in a new report that a US-China decoupling could cost $2.5 trillion in an explosive equity and bond sell-off.
The bank’s report came only days after U.S. Treasury Secretary Scott Bessent declined to rule out the possibility of delisting Chinese stocks from U.S. exchanges as tensions between the two largest economies in the world heat up over tariff hikes.
“I think everything’s on the table,” Bessent said last week shaking the nerves of the, according to Axios, 286 Chinese companies listed on U.S. exchanges with a $1.1 trillion market cap. This includes tech group Alibaba (BABA) and EV maker BYD (BYDDY).
The math boffins at Goldman Sachs got their blackboards and abacuses out to work out what such a move would mean.
In an extreme scenario, said Goldman Sachs, the decoupling could cost $2.5 trillion if investors from the U.S. and China were forced to divest their holdings of equities and debt instruments.
Chinese Stocks Would Head to Hong Kong
As reported in the South China Morning Post, U.S. investors could be forced to sell nearly $800 billion of Chinese stocks trading on American exchanges in case of a decoupling. On the other side of the equation, China could liquidate its U.S. Treasury and equity holdings amounting to $1.3 trillion and $370 billion, respectively.
The sell-off was based on the assumption that U.S. investors would be restricted by U.S. regulations from such investments, Goldman said.
In the event of a decoupling Goldman said that the U.S. listed Chinese firms would likely relist in Hong Kong.
It is stressed that this is an extreme scenario and the likely conclusion, as suggested by Bessent himself, is that the two countries find a less expensive way to ease tensions. It is important to think of the children – well, investors – during these difficult times.
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