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U.S.-China trade war may lead to recession

The economists at Goldman Sachs Group Inc are apprehensive that the escalating tensions caused by the US-China trade war might result in recession. The recent developments in the spiraling trade spat include the US imposing 10% tariff on a final US$ 300 billion worth of Chinese imports w.e.f. Sept. 1 and labeling China as a currency manipulator.

Analysts believe that rising input costs from the supply chain disruption could lead U.S. companies to reduce their domestic activity, and consequently, lower their capex spending. Goldman Sachs has asserted that it no longer expects a resolution of the impasse before the 2020 US Presidential election. It expects a 20 basis points reduction in US GDP growth to 1.8% in the fourth quarter, especially due to the larger than expected impact of trade tensions.