Goldman Sachs Group Inc is raising concerns of a US recession as the trade dispute between the US and China intensifies, boosting the effect on economic growth.
The US investment bank said that it no longer expects a trade deal before next year’s US presidential election, as threatened new tariffs take effect. It also lowered its fourth-quarter growth forecast by 0.2 percentage points to 1.8 percent, and predicted that companies might lower spending and investments amid the uncertainty.
“Fears that the trade war will trigger a recession are growing,” Goldman Sachs said in a research note on Sunday from its US economists, adding that “we have increased our estimate of the growth impact of the trade war.”
After US President Donald Trump two weeks ago issued a surprise threat to apply new tariffs on US$300 billion of Chinese goods, Beijing on Monday last week responded by halting purchases of US crops and allowing the yuan to fall to the weakest level since 2008.
Last week, Lawrence Summers, a former US Treasury secretary and a White House economic adviser during the last downturn, said that the escalating trade tensions are nudging the world economy toward its first recession in a decade, with investors demanding politicians and central bankers to act fast to change course.
In the US alone, the recession risk is “much higher than it needs to be and much higher than it was two months ago,” Summers told Bloomberg Television. “You can often play with fire and not have anything untoward happen, but if you do it too much, you eventually get burned.”
On Sunday, Summers called the China fight a “sadomasochistic and foolish trade conflict” during an interview on CNN’s Fareed Zakaria GPS.
Despite the risks, a crisis of the magnitude seen during the previous recession “would be a great surprise,” Summers said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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