Uncertainty Over Trade Has Not Hurt Capital Spending…Yet

Given all the conflict over Trump administration trade policies and the potential for a ruinous trade war, optimism among some corporate executives is wavering. But if negative outlooks on trade are affecting corporate investment and spending plans, it is not yet apparent in the data, say two experts.

A dip in cap spending is widely expected, among the many unintended consequences of the steel tariffs. “Who would bet millions in capex when the artificial generator of demand and price increases could be gone next month? Or even 12 months from now?” asks economist Alan Beaulieu of ITR Economics. Yet, he says, the monthly rate of capex in the U.S. has been relatively unaffected by either the Trump tariffs or the reduction in the corporate tax rate. ITR’s analysis shows no big downturn in capital spending, as might be expected, but rather a modest slowing in the rate of rise, which will continue into the latter half of this year.