Goldman Sachs No Longer Expecting U.S.-China Trade Deal Until 2020 Election

US China Trade Deal – BBC News

Goldman Sachs No Longer Expecting U.S.-China Trade Deal Until 2020 Election

Goldman Sachs said it no longer expects the United States and China to agree to a deal that would end their protracted trade dispute before the November 2020 presidential election, as politicians from the world’s largest economies “take an increasingly tough stance.”.

Goldman Sachs No Longer Expecting U.S.-China Trade Deal Until 2020 Election

The bank is currently expecting two consecutive rate cuts from the US Federal Reserve System (FRS) in light of growing trade policy risks, market expectations for more significant rate cuts and increased global risk associated with no-deal Brexit..

Last week, US President Donald Trump announced that he would impose a $ 300 billion 10 percent tariff on Chinese imports effective September 1, further exacerbating trade tensions with Beijing..

This step of Washington «suggests that both sides in a trade conflict are taking an increasingly tough stance, reducing the chances of a near-term settlement», – by Jan Hatzius, chief economist at Goldman Sachs.

Global equities have lost nearly $ 2.5 trillion due to tough rhetoric from the US and China. On Monday, China lowered the yuan in response to the latest tariffs in the United States.

In turn, the US Treasury accused Beijing of deliberately influencing the exchange rate between the yuan and the US dollar in order to obtain «unfair competitive advantage in international trade».

The announcement follows a sharp drop in the yuan against the dollar, when the Chinese currency broke the 7 level against the dollar for the first time since 2008.

Hatzius sees a 75% chance of a Fed rate cut in September and a 50% chance in October after last week’s cut. Previously, he expected only two cuts this year..

«The Fed is increasingly responding this year to trade war threats, bond market expectations and global growth challenges», – added Hatzius.

Citing reports that Chinese politicians are increasingly inclined not to make major concessions, and are instead willing to wait until the 2020 U.S. presidential election to resolve the dispute if necessary. Goldman Sachs analysts believe that «the deal looks distant now».

«While we previously assumed that President Trump would view the deal as better for his 2020 re-election prospects, we are now less sure about that.», – Goldman Sachs analysts say.

Goldman Sachs No Longer Expecting U.S.-China Trade Deal Until 2020 Election

Since the trade war broke out last year, Washington has imposed 25% tariffs on US imports from China for $ 250 billion. Beijing fights back by raising taxes on American goods for the billions of dollars it buys.

However, in recent months, tensions between the two countries have expanded beyond trade to include areas such as technology and security. Specifically, the US has blacklisted Huawei, which has complicated the Chinese tech giant’s relationship with US companies..

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