Despite the uncertainty surrounding global trade policy, there is a “very small” chance that the US economy tips into a recession, said Goldman Sachs Group Inc Chief Executive Officer David Solomon, as stated by a Bloomberg report. David Solomon was speaking at the Australian Financial Review Business Summit in Sydney.
US President Donald Trump is acting on the view that imbalances exist in trade, he said while adding, “Exactly how he executes is some of the uncertainty I’m talking about”.
Trump on Monday announced that the tariffs would be imposed as scheduled, remarking, ‘’No room left for Mexico or Canada. No, the tariffs you know, they are all set. They go into effect tomorrow.’’ This follows his early statement made in February when he levied a 25 per cent tariff on imports from Mexico and Canada along with a 10 per cent tariff on goods from China.
The move is contributing to volatility in equity and bond markets, with investors weighing up the prospect of a potential deterioration in global growth.
Furthermore, the White House has said Trump has signed an order doubling tariffs on China to 20 per cent that will take effect shortly after midnight in Washington.
David Solomon said, “The Chinese economy faces significant headwinds.” He also said that investors should carefully monitor how the credit cycle is impacting lenders and changing behavior.
“We’ve gone more than a decade without a regular normalized credit cycle. Excess is building up, not necessarily in any way where it’s going to create a problem, but it’s important to look forward, understand the interconnectivity,” the Goldman Sachs CEO stated.