Goldman Sachs said that it no longer expects the United States and China to agree on a truce to end their prolonged trade dispute before the November 2020 Presidential election, as policy makers from the world’s largest economies are “taking a harder line”.
The comment came after US President Donald Trump vowed last week to impose a 10 per cent tariff on $300 billion of Chinese imports from September 1, further aggravating tensions with Beijing.
The dramatic move by Washington “suggests that both sides in the trade conflict are taking a harder line, reducing the odds of a resolution in the near term,” Goldman Sachs chief economist Jan Hatzius wrote in a note.
On Monday, China let the yuan slide in response to the dramatic move by Washington on the latest US tariffs.
Hatzius also expects the US Federal Reserve to cut interest rates twice, seeing a 75 per cent chance in September and a 50 per cent chance in October, following the reduction last week. He had previously only expected two cuts this year. “The Fed has been increasingly responsive this year to trade war threats, bond market expectations, and global growth concerns,” Hatzius added.