US recession concerns rising with trade war, Goldman says

Goldman Sachs Group is raising concerns of a US recession as the trade war with China intensifies, boosting the impact on economic growth.

The US 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 Sunday from its US economists, adding that "we have increased our estimate of the growth impact of the trade war."

After President Donald Trump issued a surprise threat to apply new tariffs on $300bn of Chinese goods two weeks ago, Beijing responded on August 5 by halting purchases of US 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 US 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 US 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 Sunday, 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."

ZAR/USD
17.06
(+0.24)
ZAR/GBP
21.79
(+0.19)
ZAR/EUR
19.84
(+0.31)
ZAR/AUD
12.02
(+0.17)
ZAR/JPY
0.16
(-0.03)
Gold
1856.25
(-0.29)
Silver
22.60
(-1.56)
Platinum
847.00
(-0.39)
Brent Crude
42.29
(0.00)
Palladium
2205.16
(-0.40)
All Share
53587.11
(-1.22)
Top 40
49547.74
(-1.16)
Financial 15
9401.28
(-1.95)
Industrial 25
72949.70
(-1.72)
Resource 10
53453.42
(-0.10)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1368 votes
It depends on how the funds are used.
73% - 8871 votes
No. We should have gotten the loan elsewhere.
16% - 1959 votes
Vote