June 19, 2018 / 5:44 PM / a month ago

UPDATE 1-Trump's China trade threat a risky negotiating tactic -Goldman CEO

(Adds context, comments)

By Jonathan Spicer

NEW YORK, June 19 (Reuters) - U.S. President Donald Trump's threat to escalate a trade conflict with China is likely a negotiating tactic and not a "suicide pact," the chief executive of Goldman Sachs & Co said on Tuesday, criticizing the White House strategy as a risky tit-for-tat.

"I don't know if this is going to be the pattern of North Korea - a lot of bluster. And I don't know that we're in a suicide pact on this. I suspect that we are not going to cause the economies to collapse," Lloyd Blankfein, the Wall Street bank's CEO, said after China vowed to retaliate against Trump's threat of a 10 percent tariff on $200 billion of Chinese goods.

"I do think that ... this is kind of a negotiating tactic. That would be my best" guess, Blankfein told the Economic Club of New York. "This would not have been the course that I would have done; it would not be what I would recommend."

The war of words between the world's two largest economies came after several rounds of failed talks and, in recent days, each announced around $50 billion in tariffs. U.S. and Chinese stock markets dropped on Tuesday, including a 1.6 percent fall in Goldman shares.

The roots of the conflict are U.S. complaints over Chinese industrial policies, lack of market access in China and a $375 billion U.S. trade deficit.

"If you want ... to give somebody the incentive to see the world through your point of view, it doesn't help to remind them that your negotiating position is a better one," said Blankfein, who accompanied Trump and other U.S. CEOs on a trade mission to China late last year.

He added: "The fact is if we go tit-for-tat," China eventually runs out of U.S. imports "to apply a tariff to and we don't. So if you want to make that point, you make that point. That's what you would do if you were crazy and really want to end free trade." (Reporting by Jonathan Spicer; Editing by Will Dunham and Cynthia Osterman)

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