Goldman Sachs, the American multinational bank said that the escalating trade tension between the two countries may lead to recession. It also adds that it doesn’t expect the trade deal to be completed between the world’s largest two economies before the 2020 Presidential Election.
Donald Trump administration has announced on Aug 1st that it will slump remaining $300 Billion worth consumer goods with 10% tariffs. This led to the halt of exporting the U.S. agricultural products to China. The decision will come into the effect on Sept 1.
“We expect tariffs targeting the remaining $300bn of U.S. imports from China to go into effect,” the bank said in a note sent to clients. While the United States has accused China of manipulating their currency, Yuan. Yesterday, the People Bank of China announced that it’s ready to launch its digital currency shortly.
“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in the note authored by three of its economists, Jan Hatzius, Alec Phillips and David Mericle. “The drivers of this modest change are that we now include an estimate of the sentiment and uncertainty effects and that ﬁnancial markets have responded notably to recent trade news,” Jan Hatzius added in the note.
The investment bank said it has lowered its expectation for fourth quarters from 20 basis points to 1.8%. The note also said that this policy uncertainty will affect the other companies and lead to lower their capex spendings. It ultimately fears that the trade war will trigger the recession.