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Trade war may be slowing business and factories, Fed says

Trade War Slowing Down

WASHINGTON — Federal Reserve officials worry that the uncertainty caused by the trade war between the United States and China could be constraining business spending and may be contributing to a manufacturing slowdown that is dragging on growth.

The concerns were outlined in the Fed’s semiannual Monetary Policy Report, released on Friday as Jerome H. Powell, the chair, prepared to testify on Capitol Hill next week.

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The report said that the American financial system was more resilient today than it was before the 2008 financial crisis, that economic activity had increased at a “solid pace” in the early part of this year, and that the job market was performing well. But it also noted risks on the horizon as President Trump’s trade spat with China drags on.

Manufacturing has slumped in many advanced economies and the flow of goods has slowed, but the report cautioned that identifying specific causes was difficult. In addition to the trade war, the report cited a slowing demand for technology products and one-time factors as playing a role.

In May, the United States increased its tariffs on $200 billion in Chinese goods. Although negotiations between the two countries have been revived, the administration could impose additional levies if no resolution is reached.

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