Fears of rising global trade tensions between the U.S. and China dragged equities to post their worst second-quarter start since the Great Depression. As the Trump administration continues to signal increasingly protectionist trade policies, investors are concerned about a possible downturn in economic growth and the damage that retaliatory measures could present to U.S. exporters across industries such as agriculture, auto and industrials. In a note on Friday, Goldman Sachs analysts outlined three tactics that Beijing could use to strike back against the White House. (See also: Where to Invest for a Trade War: Goldman's View.)

President Trump upped the ante on his campaign to slap tariffs on China this Thursday, proposing another $100 billion in levies on Chinese goods. The news follows retaliatory measures from China following the GOP's initial $50 billion in new tariffs on Chinese products proposed earlier this week. On Wednesday, the government of the world's largest economy imposed tariffs on 106 U.S. products, including soy, cars and chemicals. 

Goldman suggests that any further response from China in this regard may be limited, considering the country only imported $131 billion in U.S. goods last year. For this reason, the country would be unable retaliate to the same degree as the U.S., if the Trump administration does succeed in imposing $150 billion in new tariffs.  

Limited Options 

Limited by a trade surplus with the U.S., the analysts foresee Beijing using currency depreciation to offset some of the effect of tariffs.

"Second, Chinese authorities could sell some of its large official-sector holdings of U.S. Treasuries, which would lead to a tightening of U.S. financial conditions," wrote the Goldman economists, nothing that the country is the number one holder of U.S. Treasuries. 

Lastly, the communist country could target U.S. companies in the service sector by limited their access to the Chinese market. While the U.S. has a $370 billion trade deficit with China in goods, some $56 billion in American service exports has created a $38 billion trade surplus. 

Economists indicated that while Trump's threat of more tariffs should be looked at as mainly a negotiating tactic, it raises risk of more announcements that could add to the market's already volatile run in 2018. 

"We think that means there is more risk there, but not enough for us to change our baseline forecast for an economy that is growing above trend and a Federal Reserve that continues to hike once a quarter," wrote the analysts. (See also: 5 Stocks Poised to Win in a Down Market.)