Will US-China trade face off lead to recession?

Rising fears that US-China trade war may lead to recession: Economists

Asian factories slow as China-US trade conflict starts to bite Representative image | ANI

With no respite in sight in the ongoing US-China trade war, economists and experts are wary of the crisis leading to a recession. Goldman Sachs Group said 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 world’s two largest economies before the 2020 US presidential election.

“We expect tariffs targeting the remaining $300 billion of US imports from China to go into effect,” the bank said in a note sent to clients. The company added that 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.

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

Europe, sandwiched between the two economies, is likely to take a major hit by the trade face off between US and China. The bill for damages from the US-China collision could be painfully high, starting this week if new growth figures show that Europe's economic motor, Germany, is stalled or shrinking. Germany, Europe's largest economy, is a key trade partner of both the US and China.

If the trade wars escalate to include higher US tariffs on cars made in Europe, the picture could look even worse. 

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

The US also declared China a currency manipulator.