The trade war between the US and China has been the main catalyst of US business investments struggles. On August 21st, The Trump administration declared new tariffs on Chinese imports. In response, China imposed new tariffs to counteract the ones placed by the US. This trade uncertainty has caused lower shipment on capital goods because business are less likely to invest with the risk being higher now. Jerome Powell, head of the federal reserve chair, confirms that the trade policy has"a role in the global slowdown and in weak manufacturing and capital spending in the United States". He also believes that in order to continue this prolonged period of economic growth, the US central bank will "act appropriately". The Fed also lowered short term interest rates by 25 basis points which is a sign of the slowing economic growth due the decreases in capital investments. This third quarter slump for business investments can have a negative impact on the GDP for this quarter, and potentially this year if further actions are not taken to improve certainty on trade policy.
https://www.reuters.com/article/us-usa-economy/u-s-business-investment-appears-to-struggle-in-third-quarter-idUSKCN1VG1DV
Another interesting point about the trade war is that China is now charging significantly higher tariffs on US goods opposed to other countries. For example Soy beans have a 33 percent tariff while in Brazil and Argentina it is only 3 percent.
ReplyDelete