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Goldman Sachs Group Inc. is raising concerns of a U.S. recession as the trade war with China intensifies, boosting the impact on economic growth.
The U.S. investment bank said it no longer expects a trade deal before the 2020 presidential election as threatened new tariffs take effect. It also lowered its fourth-quarter growth forecast by 0.2 percentage points to 1.8% and predicted that companies may lower spending and investments amid the uncertainty.
“Fears that the trade war will trigger a recession are growing,” Goldman Sachs said in a research note Aug. 11 from its U.S. economists, adding that “we have increased our estimate of the growth impact of the trade war.”
Will the trade war hurt China more than the US? Fmr Treasury sec Larry Summers says America will suffer either way: Tariffs cost more than they're worth, and Pres. Trump's is not "an attractive strategy at all."— Fareed Zakaria (@FareedZakaria) August 10, 2019
See the full interview on GPS, at 10 am & 1 pm ET Sunday on @CNN pic.twitter.com/U8QQJ6r2Dg
After President Donald Trump issued a surprise threat to apply new tariffs on $300 billion of Chinese goods two weeks ago, Beijing responded on Aug. 5 by halting purchases of U.S. crops and allowing the yuan to fall to the weakest level since 2008. Trump’s administration fired back within hours, formally labeling China a currency manipulator.
Lawrence Summers, a former U.S. Treasury secretary and a White House economic adviser during the last downturn, said last week the escalating trade tensions are nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course.
In the U.S. alone, the recession risk is “much higher than it needs to be and much higher than it was two months ago,” he told Bloomberg Television. “You can often play with fire and not have anything untoward happen, but if you do it too much you eventually get burned.”
On Aug. 11, Summers called the China fight a “sadomasochistic and foolish trade conflict” during an interview on CNN’s “Fareed Zakaria GPS.” Summers said that despite the risks, a crisis of the magnitude seen during the previous recession “would be a great surprise.”