The Trump administration’s escalation of tariff threats against China makes sense as a negotiating strategy, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said.

“That’s what you’d do if it was a negotiating position and you wanted to remind your negotiating counterparty of how much firepower you have,” Blankfein said Tuesday in an interview at the Economic Club of New York. “I don’t think we’re in a suicide pact on this, so I suspect we’re not going to cause the economies to collapse,” said Blankfein, who was speaking with Bloomberg News Editor-in-Chief John Micklethwait.

A trade battle is brewing between the world’s two biggest economies as China vows to retaliate against new tariffs planned by U.S. President Donald Trump. While the US$50 billion in tariffs already announced were mainly on industrial goods, Trump is now targeting US$200 billion in additional Chinese imports, a move that could push up prices for U.S. shoppers on items such as toys, tools and t-shirts.

“I do think -- as some people have commented -- that this is part of a negotiating pattern, that would be my best take,” Blankfein said of Trump’s threats.

Earlier Tuesday, Nobel Prize-winning economist Paul Krugman said he’s “amazed at the complacency of markets as Trump marches off to trade war.”

--With assistance from William Mathis