China's President Xi Jinping (L) and US President Donald Trump attend a working session on the first day of the G20 summit in Hamburg, northern Germany, on July 7, 2017.

The U.S. trade fight is getting nastier and it's more likely to escalate, but administration officials are hoping to make real progress on NAFTA, a development that could give some comfort to a troubled stock market.

President Donald Trump Wednesday told U.S. Trade Representative Robert Lighthizer to consider bumping the proposed 10 percent tariffs on $200 billion in Chinese goods to 25 percent. The administration extended the comment period on this latest round of tariffs by a week to Sept. 5.

Goldman Sachs economists said the latest threat makes it more likely Trump will move ahead with another wave of tariffs.

"While it is unclear whether the Administration will move forward with a 25 percent tariff, we believe the announcement that it is under consideration further raises the probability that tariffs of at least 10 percent will be imposed on a substantial portion of the $200bn in imports recently detailed," they wrote Thursday.

Meanwhile, strategists say the Trump administration has been in need of a trade "win" as it sends China increasingly strident messages.

"NAFTA's going great. We're getting together. Thursday is going to be a big day," said Daniel Clifton, head of policy research at Strategas. "Mexico and the U.S. appear to be making significant progress on autos. The rumor is they want a deal by Aug. 15 with Mexico, and then reopen to Canada and see if they can get a final deal by late August."

Stocks were sharply lower Thursday, ahead of the open after the market waffled on Wednesday, with the Dow and lower amid trade worries. Shanghai stocks were down 2 percent, and global equities were weaker across the board. Treasury yields dipped in a flight-to-safety trade. The dollar firmed, but the Chinese yuan slid to a new 14-month low.

The new tariff threat on Chinese goods comes just days after Beijing retaliated against the administration's imposition of 25 percent tariffs on $34 billion in goods. The Trump administration is considering an additional $16 billion in goods, but that review is ongoing, an official said Wednesday.