Stock

Goldman: “A Bigger Growth Hit from the Trade War”

A few brief excerpts from a Goldman Sachs research note:

We expect tariffs targeting the remaining $300bn of US imports from China to go into effect and no longer expect a trade deal before the 2020 election. …

Overall, we have increased our estimate of the growth impact of the trade war. In our baseline policy scenario, we now estimate a peak cumulative drag on the level of GDP of 0.6%, including a 0.2% drag from the latest escalation. 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. Based on our estimates, we have taken down our Q4 growth forecast by 0.2pp to 1.8% (qoq ar).

CR Note: This isn’t enough drag to take the economy into recession, but the trade war appears to be slowing growth.   Also, the Fed can’t offset all of the negative impacts of the trade war.

%d bloggers like this: