Goldman Sachs slashes US GDP growth forecast as US-China trade war continues
The US-based investment bank downgraded its fourth-quarter growth forecast for the US economy, blaming the ongoing US-China trade war for driving recession fears.
Goldman Sachs cut its fourth-quarter growth forecast by 20 basis points to 1.8% over the weekend, blaming the ongoing US-China trade war for potentially driving the American economy into a recession.
‘We have increased our estimate of the growth impact of the trade war,’ Goldman Sachs chief economist Jan Hatzius said in a note to investors on 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.’
US-China trade war heats up
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.
The move by Trump was in response to China allowing its currency to weaken against the dollar, with the Chinese yuan hitting the $7 landmark, making its exports cheaper.
Officials in Beijing also announced they would stop importing US agricultural goods.
Political uncertainty contributing to lower US growth, Goldman Sachs says
According to Goldman Sachs, political uncertainty is impacting global trade and fuelling lower-than-expected GDP growth in the US.
‘The policy uncertainty effect may lead ﬁrms to lower capex spending as they wait for uncertainty to resolve. Relatedly, the business sentiment effect of increased pessimism about the outlook from trade war news may lead ﬁrms to invest, hire, or produce less,’ Hatzius said.
Goldman Sachs said that the US-China trade war has eroded around 0.6% of GDP, including a 0.2% drag from the latest escalation.
‘Fears that the trade war will trigger a recession are growing,’ Hatzius added.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.