A report last week showing the U.S. economy grew at a 2.1% pace in the second quarter featured the first drop in business investment since 2016, and trade overall was a net drag on growth.
And it is one factor in the global manufacturing chill, exacerbating weakness from longstanding factors like aging demographics in Europe and Japan.
Trade uncertainty, weak business investment, and sluggish growth abroad are all likely to top Fed Chairman Jerome Powell’s list when he explains why the Fed is cutting rates, and why more rate cuts may be ahead. The Fed is expected to lower its benchmark borrowing rate by a quarter percentage point to between 2.00% and 2.25%.
“The trade war has been disruptive to the global economy and it’s created a feedback loop” that poses a risk to U.S. growth, said Eric Winograd, Senior U.S. Economist at AllianceBernstein.