The investment bank said the most important indicator to watch is if the Chinese trade delegation travels to Washington for negotiations, or cancels the trip altogether. Mnuchin and Lighthizer offered no details of China's alleged backsliding, and there was no immediate response from Beijing.
It's unclear if we will see the same script play out this time, but it is hard to imagine the USA following through on such a punitive measure.
The timing of Trump's threat triggered speculations that it was aimed at creating pressure on Beijing ahead of the talks in Washington.
By threatening to raise taxes on Chinese imports, Trump is throwing down a challenge to Beijing: Agree to sweeping changes in China's government-dominated economic model - or suffer the consequences.
"I think the disruption to the world economy and the financial markets is far more costly than any gains the U.S. will achieve in trade relations with China", Gary Hufbauer from the Peterson Institute for International Economics told DW. "It certainly increases the possibility that you'll have no deal".
Mnuchin said it would be unfortunate if the two sides, the world's biggest economies, could not conclude an agreement and they had hoped to conclude a deal by the end of the week.
To be certain, Trump's tariff increase on Chinese goods at this late stage in trade talks is a calculated provocation but it can not have any long-term impact unless it elicits the overreaction that Trump is trying to provoke. Politically, this puts Chinese leaders in a tough position. Meanwhile, Chinese trade officials are heading to Washington this week to continue hammering out a potential deal-but Trump may have damaged the chances of finalizing an agreement this week after tweeting a threat to hike tariffs on Chinese imports.
US Trade Representative Robert Lighthizer has shed light on the reasons behind the planned increase in tariffs on $200 billion worth of Chinese goods from 10 to 25%. The Chinese have retaliated by targeting $110 billion in US imports. Japanese markets were closed for a public holiday.
But Trump is leaving the door open for China to return to the table if it's willing to behave like a proper negotiating partner.
A day later, Treasury Secretary Steven Mnuchin and the top US trade negotiator, Robert Lighthizer, said that China was reneging on commitments it made in earlier rounds of negotiations. "The Trump administration understands that the big problem with China is not the law itself, it's the lack of rule of law", Dufour said.
The US and China have been engaged in a tit-for-tat tariff war since March 2018, when the Trump administration accused China of plundering US intellectual property.
In response, a Chinese foreign ministry spokesman, Geng Shuang, said Beijing "is honest in continuing consultations".
"They couldn't abandon it just because of a Twitter comment", said Ma. But they have yet to release details, and it is unclear whether the concessions will satisfy Trump.