U.S. President Donald Trump talks to reporters as he leaves the White House on August 1, 2019 in Washington, DC. Trump is traveling to Cincinnati, Ohio, for a campaign choice.
Chip Somodevilla | Getty Images News | Getty Images
Goldman Sachs no longer believes the world's two largest economies will be able to resolve their long-standing trade conflict before the US presidential election next year.
It comes shortly after the United States officially designated China as a "currency manipulator," amid a faster intensification of tensions between the two economic giants.
On Monday, the US Treasury accused Beijing of deliberately influencing the exchange rate between the yuan and the US dollar to gain an "unfair competitive advantage in international trade." [1[ads1]9659002] The announcement followed a sharp fall in the yuan against the dollar, with the Chinese currency breaking $ 7 per dollar for the first time since 2008.
Late last week, China pledged to step back after President Donald Trump promised to impose $ 300 billion in Chinese import duties.
Analysts at Goldman Sachs, led by chief economist Jan Hatzius, said in a research note published late Monday that they expected this move.
"News since President Trump's tariff announcement last Thursday indicates that US and Chinese policy makers are taking a tougher line, and we no longer expect a trade deal before the 2020 election."
& # 39; A trade agreement now looks far beyond & # 39;
In targeting the roughly $ 300 billion Chinese goods that had not already been targeted by US taxes, the US president overestimated the overwhelming objections of almost his entire industry, according to a report published by The Wall Street Journal on Sunday, citing people who are familiar with the matter.
The United States is entitled to impose the charges against Beijing from September 1.
Although we had previously assumed that President Trump would see that making a deal more beneficial to the reelection prospects in 2020, we are now less sure that this is his view, say analysts at Goldman Sachs.
The investment bank added China's decision to suspend purchases of US agricultural goods and the decision to allow the yuan to break the psychologically important level of $ 7 per dollar "prompted a swift and meaningful response" to Trump's latest tariff threat.
Citing reports that Chinese decision makers are increasingly reluctant to make large concessions and are prepared to wait until after the 2020 US presidential election to resolve the dispute if necessary, Goldman said "a trade deal now looks far beyond . "
Since the start of the trade war last year, Washington has introduced 25% duty on $ 250 billion in US imports from China. Beijing retaliated by releasing the billions of dollars of US dollars it buys.
However, in recent months tensions between the two countries have expanded beyond trade and into areas such as technology and security. Specifically, the United States placed Huawei on a blacklist that made it more difficult for the Chinese tech giant to do business with US companies.
– CNBC's Yen Nee Lee contributed to this report.