US private sector cuts $32.5b capital spending due to tariff, trade tensions: Survey

WASHINGTON - "Tariff hikes and trade policy tensions" took a toll on private sector investment in the United States in 2018, Federal Reserve Bank (Fed) of Atlanta said on Monday.

"We estimate that tariff hikes and trade policy tensions lowered gross investment in 2018 by 1.2 percent in the US private sector and by 4.2 percent in the manufacturing sector," Atlanta Fed said in its January Survey of Business Uncertainty.

According to Atlanta Fed's estimation, the negative impact of tariff hikes and trade policy tensions had lowered 2018 capital spending by $32.5 billion.

For manufacturing business with "relatively high exposure to international trade," Atlanta Fed said that enterprises in the United States had to cut $22 billion in 2018 due to tariff and trade tensions.

Atlanta Fed also noted that 20 percent of the firms that were affected by trade problems were reassessing capital expenditure plans. Half a year ago, the figure was 19 percent.

Specifically, goods producers, service providers, along with firms in retail and wholesale trade, transportation, and warehousing, all saw a higher figure.

Among the firms that were reassessing capital expenditure plans, 36 percent of the firms postponed their plans, while 16 percent of firms dropped their plans. In July 2018, the figure was 22 percent and 9 percent respectively.

Atlanta Fed noted that the survey continued to suggest that tariffs and trade tensions had a "rather modest" impact on US business investment. However, it warned that more consequences could still lies ahead.

"Even if the near-term business investment effects of trade policy developments are modest in magnitude, trade barriers can disrupt supply chains, raise input prices, and lead to higher prices for consumer goods," Atlanta Fed said.

"That's important to keep in mind as the trade policy outlook remains murky," Atlanta Fed added.

Survey of Business Uncertainty was conducted by Atlanta Fed, University of Chicago Booth School of Business and Stanford University. The survey covers all regions of the US economy, every industry sector except agriculture and government, and a broad range of firm sizes.