Trump’s deepening trade wars threatening key engine of US economy

Joshua
Roberts/Reuters

• Some US firms are already putting the brakes on their
  investment plans due to uncertainties surrounding the mounting
  global-trade conflict. 
• A new survey of firms conducted by the Federal Reserve
  Bank of Atlanta, Stanford University, and the University of
  Chicago’s Booth School finds about one-fifth of companies are
  rethinking business spending due to “recently announced tariff
  hikes or concerns about retaliation.”
• The survey was conducted before the latest round of
  tariffs on China and the retaliation that followed.

The trade war resulting from US belligerence toward its global
trading partners, in particular the Trump administration’s
imposition of unilateral tariffs on a range of imported goods,
are already hurting the investment plans of US firms.

A new survey of firms conducted jointly between economists at the
Federal Reserve Bank of Atlanta, Stanford University, and the
University of Chicago’s Booth School found
about one-fifth of respondents were rethinking their business
spending because of “the recently announced tariff hikes or
concerns about retaliation.”

Within that group, “firms have reassessed an average 60% of
capital expenditures previously planned for 2018–19. The main
form of reassessment thus far is to place previously planned
capital expenditures under review,” the authors wrote in a blog
post.

“Trade policy tensions between the United States and China

have only escalated since our survey went to field. The
negative effects of tariff worries on US business investment
could easily grow.”

Federal Reserve Bank of
Atlanta

The concerns were greater at goods-producing firms, which
are on the frontline of the trade wars, rather than services
companies. Some 30% of manufacturers and 28% of retail and
wholesale trade firms said they were reassessing their capital
expenditures, versus 14% of services companies.

“Manufacturing is highly capital intensive… so the
investment effects of trade policy frictions are concentrated in
a sector that accounts for much of business investment,” the
economists said.

“Trade policy tensions between the United States and China
have only escalated since our survey went to field. The negative
effects of tariff worries on US business investment could easily
grow.”

Federal Reserve Bank of
Atlanta

Fed officials have collectively expressed growing concern over
global-trade frictions. Minutes from the central bank’s August
meeting said some policymakers’ business contacts “reported
that
uncertainty regarding trade policy had led to some reductions
or delays in their investment spending.”

Atlanta Fed President Raphael Bostic told Fox Business in
an interview from this weekend’s Jackson Hole conference that
“the uncertainty around trade policy is something that
comes up all the time when I talk to my
contacts.”