Published: Tue, August 13, 2019
Markets | By Otis Pena

Trade War could Lead US into Recession, Goldman Sachs Warns

Trade War could Lead US into Recession, Goldman Sachs Warns

"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.

To Goldman Sachs CEO David Solomon the present economic habitat does not discern like the pre-crisis days of August 2007.

The trade war between the United States and China escalated in recent weeks after Trump's surprise announcement of 10% tariffs on the remaining $300 billion in Chinese imports that had eluded previous duties, leading markets to recently have their worst day of the year.

Meanwhile, the U.S. has also declared China a currency manipulator, but China continues to deny the accusation.

The People's Bank of China, however, denied using their currency to undermine the United States position and blamed fall in the Yuan on the trade war and disrupted economy.

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

The ongoing trade war between the world's two largest economies continues to rage on, with US President Donald Trump recently imposing a 10% tariff on an additional $300 billion worth of Chinese imports.

Rising input costs from the availability chain disruption may lead USA companies to reduce their domestic activity, the note stated. The company admitted that the decision was affected by fears surrounding a potential global recession as brought about by the trade war.

'The fears that the trade war will trigger a recession are growing, ' agree the experts. Similarly, policy uncertainty is likely to compel companies to lower their capital expenditure, the economists added.

Senior China Economist at Capital Economics, Julian Evans-Pritchard, stressed that at this point in the trade war, the consumer may no longer have the capacity to "rescue" the Chinese economy.

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