Trade War between China and the United States Pulling Down Investments
September 10, 2019 | Tuesday
The trade war between China and the United States is dragging down companies’ investment decisions, according to the Federal Reserve Chairman, Jerome Powell’s speech on Friday in Switzerland.
Powell also added that the case on the uncertainty around a policy is causing some companies to hold back now on investments. Federal Reserve have been hearing quite a bit about uncertainty and so, for businesses, to particularly make longer-term investments in plants or equipment or software, the companies want some certainty to the Fed that the demand will be there.
Since last year, China and the United States have been engaged in a trade war that has rattled financial markets. An escalation in August between the two countries led United States equities to their biggest one-month loss since May.
After Chinese trade officials said that they will fly to Washington next month to continue negotiations, tensions between the two countries, China and the United States, thawed slightly this week. So, the expectations of the two sides reaching a deal are low.
Easing its stance on monetary policy and following other banks overseas, Federal Reserve has been contributed uncertainty around trade. The Fed cut rates by 25 basis points in July and is expected to cut rates again later this month.
Lower rates are helping to keep the United States economy in a good place, according to the Federal Reserve Chairman. On Thursday, according to data from the Institute of Supply Management, the United States services sector expanded at a faster-than-expected rate in August. However, the United States manufacturing sector was contracted for the first time since 2016, last month.
Chairman Jerome Powell also said in his speech that he does not expect the United States to fall into a recession.
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