Goldman Sachs said on Sunday, Aug. 11, 2019, in a note to its clients "Overall, we have increased our estimate of the growth impact of the trade war. We expect tariffs targeting the remaining $300 billion of U.S. imports from China to go into effect."

Goldman Sachs no longer expects a trade deal between the U.S. and China being done before the 2020 U.S. presidential election: Nov. 3, 2020.

Goldman Sachs also said it lowered by 20 basis points its fourth-quarter U.S. growth forecast to 1.8 percent because of the larger than expected impact from the developments in the trade tensions with China.

Rising input costs from the supply chain disruption could lead U.S. companies to reduce their domestic activity. Such “policy uncertainty” may also make companies lower their capex spending, Reuters reported.

For investors it could be of interest taking note of the fact that President Donald Trump’s announcement last week on adding a 10 percent tariff as of September 1, to virtually every Chinese import that’s not yet subject to punitive duties took U.S. Trade Representative Robert Lighthizer by surprise, people familiar with the discussions said.

Today, it looks relatively safe to say that the 10 percent tariff on another $300 billion of Chinese goods, from smartphones to clothing, will go into effect on September 1. Please keep in mind that this new tariff will be separate from the already existing 25 percent tariff on $250 billion of imports from China.

The United States Trade Representative (USTR) has yet to issue specific coverage for this new 10 percent tariff.

Investors can be certain that over the near future at least, they will have to face a lot of "Uncertainty" that, of course, will go together with a lot of "Volatility." 

One thing is for sure, at least in my opinion, all these trade tensions are supportive for the dollar remaining stronger than many wish for and that is not supportive for equities overall notwithstanding central banks, like the Fed, the ECB, the Bank of Japan and many others are in "some kind of a standby" mode to support growth and therefore ready to further lower their key interest rates.

Talking for a moment about the probability of a recession in the United States in 2020, I think that "If" the Federal Reserve would lower its Fed funds rate by 75 basis points over a relative short period of time, which is of course not needed from an U.S. economic standpoint today, the chances of having to face a recession in the United States next year remain rather limited.

Of course, in case the U.S. would apply a tariff rate of 25 percent on “all” imports from China, under such circumstances, the chances for a recession in the U.S. in 2020 could raise to about a 50/50 situation because, among other things, U.S. companies would no longer be able to “absorb” in their profit margins the higher costs of the products coming from China, which would then result in the fact that U.S. consumers would have to pay for the higher costs.

Economists calculate that under such a scenario, U.S. GDP growth could decrease by about 100 basis points, which is of course not recession territory yet.

Notwithstanding all this, I still continue to prefer by far the United States for equity allocations while U.S. Treasuries keep their "always liquid" safe haven status. Also the dollar should keep its "safe haven" status in the "Uncertain" times we are in now and where we could remain for some time to come.

As an investor one could ask him- or herself this very simple but very important question "What currency should I "Use" and "Trade in" other than the dollar?

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.