New research from the Federal Reserve indicates that trade uncertainty is likely to trim U.S. economic output by more than one percent through early 2020. Economists charted uncertainty with text analyses of newspaper articles and corporate-earnings calls.
Higher uncertainty could lead firms to delay their investment and reduce their hiring, lower consumer confidence and spending, and ultimately curtail economic activity around the world. “The rise in [trade policy uncertainty] in 2018 and 2019 has gone hand in hand with a slowdown in world industrial production and global grade,” said the research report.
The researchers found that an initial increase in trade-policy uncertainty in the first half of 2018 shaved around 0.8 percent from U.S. and global economic output in the first half of 2019. They further calculated that more-recent increases in uncertainty will now reduce U.S. output by more than one percent in the first half of 2020.
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