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.
Dutch brewing company Heineken NV yesterday said that it has reached an agreement to acquire a subsidiary brewery of Taiwan’s Sanyo Whisbih Group (三洋維士比集團). Heineken is to assume majority ownership and management rights of the Long Chuan Zuan Co (龍泉鑽興業) brewery in Pingtung County’s Neipu Township (內埔), the Dutch company said. It would become the first multinational brewing company to operate brewery in Taiwan once the acquisition is completed. The deal has been approved by the Ministry of Economic Affairs’ Investment Commission, but details of the financial transaction cannot be disclosed at this time, as terms of the settlement have not been completed,
LOOK WHO OWES: China’s exposure to Taiwanese banks was the second-largest, with Luxembourg third, followed by Hong Kong and Japan, the central bank said The US remained the largest debtor country to Taiwan’s banking sector for a 27th consecutive quarter in the first quarter of this year, with its exposure rising 8.3 percent from a quarter earlier on the back of an increase in US bonds, the central bank said on Friday. Data compiled by the central bank showed that outstanding international claims by Taiwanese banks on a direct risk basis to the US stood at US$125.38 billion as of the end of March. Department of Financial Inspection deputy head Pan Ya-hui (潘雅慧) said that the US Federal Reserve’s launch of a rate hike cycle in
GREEN CITY: The company is set to invest US$8 billion to make electric vehicles and batteries for a new city that would rely entirely on renewable energy sources Indonesia said that Hon Hai Precision Industry Co (鴻海精密) is considering investing in the country’s new capital city, a move that would bolster the US$34 billion construction project. Hon Hai, which is known as Foxconn Technology Group (富士康科技集團), is looking at setting up an electric bus system and an Internet of Things network at Nusantara, as Indonesia’s new capital is to be called, Indonesian Minister of Investment Bahlil Lahadalia said in a statement yesterday. Hon Hai chairman Young Liu (劉揚偉) met with Indonesian President Joko Widodo on Saturday to discuss the company’s plan to invest US$8 billion to build a manufacturing plant
WHOLLY OWNED SUBSIDIARY: Costco Wholesale said it expected the purchase of the remaining 45 percent stake to add 1 to 1.5 percent to its earnings per share US-based Costco Wholesale Corp on Thursday said that it had purchased the remaining 45 percent stake in Costco President Taiwan Inc (台灣好市多) for US$1.05 billion, making the local company a fully-owned unit. “We estimate that the purchase would add about 1 to 1.5 percent to [our] earnings per share,” Costco said in a statement. Costco President Taiwan was established as a joint venture with Kaohsiung-based President Group (大統集團), which held a 45 percent stake. Since the first Costco store opened in Kaohsiung in 1997, 14 outlets have been set up in Taiwan, company data showed. PROFITABLE Three Costco stores in Taiwan — in Taipei’s Neihu