US Recession Concerns Rising With Trade War, Goldman Sachs Says

Berkshire Hathaway CEO Warren Buffett and JPMorgan Chase CEO Jamie Dimon

Goldman Sachs stated it lowered its fourth-quarter US growth forecast by 20 basis factors to 1.8% on a more significant than expected impact from the developments within the trade tensions.

In a note sent to its clients, the investment bank considered it impossible to reach an agreement between Washington and Beijing before the US presidential elections scheduled for November next year.

Earlier this month, Trump announced that he would impose a 10% tariff on an additional $300 billion of Chinese goods to the USA from September 1, a move that prompted China to respond by suspending purchases of US farm products.

The United States also declared China a currency manipulator. A weaker yuan makes Chinese goods cheaper on the worldwide market, though the Asian economic giant denied that it manipulated the currency.

The year-long trade dispute between the two countries has revolved around issues such as tariffs, subsidies, technology, intellectual property and cyber security, among others.

"We have increased our estimate of the growth impact of the trade war".


The Chinese also seem to be content to wait until after the 2020 US presidential election for an end to the trade war under a Democrat president.

Goldman Sachs lowered its fourth-quarter growth forecast by 20 basis points to 1.8%, citing a larger-than-expected impact of recent events related to the trade war between the two major economies.

The economist also said supply chain disruption of rising input costs may lead USA firms to lower their domestic activity, and Goldman now estimates a cumulative drag on GDP of 0.6%, including a 0.2% drag from the latest escalation.

'The policy uncertainty effect may lead firms to lower capex spending as they wait for uncertainty to resolve. JPMorgan Chase economist Joseph Lupton apprised last week that the possibility of a United States recession over the next 12 months has escalated to 40%.

U.S. shares finished lower on Friday after U.S. President Donald Trump said that Washington was continuing trade talks with Beijing, but that the U.S. was not going to make a deal for now.

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