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Goldman Sachs does not expect trade deal before 2020

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NEW YORK Goldman Sachs Group 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 two economic giants before the 2020 US presidential election.

"We expect tariffs targeting the remaining US$300 billion (S$416 billion) of US imports from China to go into effect," the bank said in a note sent to clients.

US President Donald Trump announced on Aug 1 that he would impose a 10 per cent tariff on a final US$300 billion worth of Chinese imports on Sept 1, prompting China to halt purchases of US agricultural products.

The US also declared China a currency manipulator. China denies that it has manipulated the yuan for competitive gain.

The year-long trade dispute has revolved around issues such as tariffs, subsidies, technology, intellectual property and cyber security.

Goldman Sachs said it lowered its fourth-quarter US growth forecast by 20 basis points to 1.8 per cent on a larger-than-expected impact from the developments in the trade tensions.


"Overall, we have increased our estimate of the growth impact of the trade war," the bank said in the note authored by three of its economists, Mr Jan Hatzius, Mr Alec Phillips and Mr David Mericle.

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.