Goldman Sachs Cuts Growth Forecast

Goldman Sachs Cuts Growth Forecast”

A Goldman Sachs Group Inc. logo hangs on the floor of the New York Stock Exchange in New York, U.S., on Wednesday, May 19, 2010.

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

With no respite in sight in the ongoing US-China trade war, economists and experts are wary of the crisis leading to a recession.

In a note sent to clients Sunday, the investment bank said it no longer expects Washington and Beijing officials to strike a trade agreement before the 2020 US presidential election.

On Friday, Trump said that Washington was continuing trade talks with Beijing, but that the USA was not going to make a deal for now, remarks which helped to drive a late sell-off in a volatile session that saw the Dow Jones Industrial Average fall 0.34 per cent, the S&P 500 lose 0.66 per cent and the Nasdaq Composite drop 1 per cent.

"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", Hatzius said of the lower growth forecast.

"We expect tariffs targeting the remaining $300bn of USA imports from China to go into effect", the bank said in a note sent to clients.

US President Donald Trump announced this month that he would impose a 10% tariff on a final $300 billion worth of Chinese imports on September 1, prompting China to halt purchases of US agricultural products. The worldwide banking group further said it is not expecting a China-U.S. trade deal before Trump battles it out at the 2020 election.

Sachs explained that contrary to Trump and Washington's claims that China is a "currency manipulator", the reason why the country allowed the yuan to depreciate is that Beijing is looking for ways to stabilize the country's growth despite continued attacks from the U.S.

Trump slapped the additional tariffs despite opposition from practically all of his top advisers. 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. The company admitted that the decision was affected by fears surrounding a potential global recession as brought about by the trade war.

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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