Goldman Sachs Group is raising concerns of a USA recession as the trade war with China intensifies, boosting the impact on economic growth. It also lowered its fourth-quarter growth forecast by 0.2 percentage points to 1.8 percent, and predicted that companies might lower spending and investments amid the uncertainty.
"We have increased our estimate of the growth impact of the trade war", said Goldman Sachs chief United States economist Jan Hatzius in a note to clients Sunday.
"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", said Jan Hatzius, Goldman Sachs' chief USA economist in a note to clients.
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.
Mr Trump's administration fired back within hours, formally labelling China a currency manipulator.
Goldman Sachs Inc, one of the world's leading investment banks, on Sunday said there are signs that the ongoing trade war between the United States and China may plunge the world into another recession. China quickly retaliated by banning purchases of USA agricultural products such as soybeans. Only Peter Navarro, Assistant to the President, and Director of Trade and Manufacturing Policy, supported Trump in this decision, according to The New Yorker. In an earlier note to investors, Goldman asserted "a trade deal now looks far off" as Chinese policymakers seem more and more inclined not to make major concessions. However, he recognizes the minimum one thing that would throw the economy off track: the Trade War. Trump's new 10 percent levy he announced July 31 also figured prominently in Goldman's downbeat assessment.
Former US Treasury Secretary Larry Summers who was elected to the post by erstwhile President Bill Clinton said that they are at such a crucial moment since the 2009 Financial Crisis. A weaker yuan makes Chinese goods cheaper on the global market, though the Asian economic giant denied that it manipulated the currency.