Goldman Sachs Group Inc said on Sunday that fears of the US-China trade war leading to a recession are increasing and that Goldman no longer expects a trade deal between the world’s two largest economies before the 2020 U.S. presidential election.
“We expect tariffs targeting the remaining $300bn of US imports from China to go into effect,” the bank said in a note sent to clients.
The US President Donald Trump announced on Aug. 1 that he would impose a 10% tariff on a final $300 billion worth of Chinese imports on Sept. 1, prompting China to halt purchases of US agricultural products.
The year-long trade dispute has revolved around issues such as tariffs, subsidies, technology, intellectual property and cybersecurity, among others.
Goldman Sachs said it lowered its fourth-quarter US growth forecast by 20 basis points to 1.8% on a larger than expected impact from the developments in the trade tensions.
Rising input costs from the supply chain disruption could lead US companies to reduce their domestic activity, the note said. Such “policy uncertainty” may also make companies lower their capex spending, the economists added.