Explaining the Malaise in U.S. Investment: The Role of Uncertainty

11/20/2019

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Sri Thanabalasingam | TD Economics

Highlights

  • Economic policy uncertainty has risen considerably since 2018 owing in large part to the U.S.-China trade war.
  • As uncertainty has risen, U.S. firms have been left without a clear understanding of how trade policy might evolve, leading them to delay investment.
  • The category of investment most impacted by uncertainty, to date, is equipment, specifically in areas directly caught in the middle of the U.S.-China trade war.
  • If uncertainty remains elevated, it could lower the amount of capital available to the economy, thus weakening productivity.  
  • A resolution in the U.S.-China trade conflict could boost investment, but the real obstacle is returning more certainty to economic policy. Without this, we will likely see lackluster investment growth for some time to come.
TheRoleofUncertainty

 

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