The company added that it lowered its fourth-quarter USA growth forecast by 20 basis points to 1.8 per cent on a larger than expected impact from the developments in the trade tensions.
Financial conditions, policy uncertainty, business sentiment and supply chain distribution will all contribute to lower-than-expected growth as a result of the trade war, Hatzius stated, adding that there are growing fears of a recession.
-China commerce war resulting in a recession are increasing and that Goldman no longer expects a trade deal between the world's two biggest economies before the 2020 US presidential election.
On Friday, Trump said that Washington was continuing trade talks with Beijing, but that the US was not going to make a deal for now, remarks which helped to drive a late sell-off in a volatile session that saw the Dow Jones Industrial Average fall 0.34 per cent, the S&P 500 lose 0.66 per cent and the Nasdaq Composite drop 1 per cent.
The uncertainty caused by the trade war could force companies to reduce spending, notes the text, signed by three Goldamn Sachs economists: Jan Hatzius, Alec Phillips and David Mericle.
Goldman Sachs affirmed its expectation Trump's new round of tariffs will be implemented on Sept.1.
In a note sent to its clients, the investment bank considered it impossible to reach an agreement between Washington and Beijing before the USA presidential elections scheduled for November next year.
President Trump announced Thursday his administration will impose a 10 percent tariff on $300 billion worth of Chinese goods amid trade talks and has threatened to raise it to 25 percent if no deal is made. China quickly retaliated by banning purchases of US agricultural products such as soybeans.
Goldman Sachs' latest estimate echoes one it made August 6 when it came to practically the same conclusion. The bank has promised not to use the yuan as a weapon in the trade war. He said that despite the risks, a crisis of the magnitude seen during the previous recession "would be a great surprise". A weaker yuan makes Chinese goods cheaper on the worldwide market, though the Asian economic giant denied that it manipulated the currency.