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- The trade war is taking a massive toll on the global economy.
- The bank expects an “extended truce,” and sees the drag on growth waning next year, “assuming that tariffs stay at current levels through 2020.”
- Below are four charts showing the damage of the trade war on both sides.
- View Business Insider’s homepage for more stories.
The trade war is taking a massive toll – earlier this week, the World Trade Organization warned that global trade was stalling because of it.
Goldman Sachs economists said that the trade war is hitting China the hardest – mainly due to the drop in net trade.
The bank expects an “extended truce,” and sees the drag on growth waning next year, “assuming that tariffs stay at current levels through 2020.”
Still, the impact has been clear. Below are four charts showing the extent of the damage.
US financial conditions have tightened.
Goldman Sachs Economics Research
Through Goldman’s own index on financial conditions, the data shows that conditions worsened through the trade war, with the divergence starting to widen around March 2018. Right now it looks like it’s only getting larger.
People in China are getting worried.
Goldman Sachs Investment Research
Baidu, the Chinese internet and AI company, which also functions as a search engine, is a good measure for uncertainty, according to Goldman. As shown, at certain points there has been major spikes at crucial points on the trade war.
China’s been worse off in terms of the hit on GDP, but only just.
Goldman Sachs Economic Research
While the US benefitted in terms of net trade, both sides suffered in terms of real income, financial conditions, and trade policy uncertainty. Ultimately it’s knocked off roughly 0.5% of US GDP and 0.7% off China’s – China’s GDP slowed to its lowest level since the ’90s earlier this year.
The trade war will keep dragging into the new decade.
Goldman Sachs Economic Research
For both sides, the trade war is going to be a substantial drag on GDP into 2020. China won’t recover till the second half of next year, and the US, nearer to 2021.
