Better than 50% chance of new tariffs, which weakens inventory

Jeffrey Gundlach, head of investment company DoubleLine, estimates that President Donald Trump's chances of increasing his tariffs on China are better than 50%, which weighs more heavily on a stock market he believes is already weakened.

"I think we're going to continue to see more tension and I think the 25% rate increase is better than 50% chance," Gundlach told Scott Wapner about CNBC's "half-time report." Tuesday. "The Chinese Premier and the President of the United States want to know that they have triumphed and that they have not yielded."

"I think you have an irresistible force meeting an immutable object," added Gundlach.

DoubleLine manages over $ 130 billion in assets.

If rates rise as expected on Friday, Gundlach thinks that the US stock market will continue to sell. The Dow Jones Industrial Average Index dropped more than 460 points this week after Trump threatened Sunday to add more tariffs on Chinese imports.

"It's already happening, I think, and obviously the market does not want a price increase, so it's responding quite well to that," Gundlach said.

"I think we are in a late cycle and that the market can only be qualified by how I view market price developments as a bear market," Gundlach said. "The market has not gone for 15 months."

"People continue to act as if it's kind of a dragging locomotive, but the compound index of the New York Stock Exchange – which is most important to me because it's the biggest – it peaked in January 2018 and could not quite do it We came back to this peak in October and we could not come back to that level of October and we still find it again, "said Gundlach.