Trade uncertainty continues to grow - A lower discount rate will not change this uncertainty

Stanley Baldwin, UK prime minister in the 1930s said: “Business can flourish with tariffs. Business can flourish without tariffs. Business cannot flourish where there is uncertainty.”

It is hard to disentangle the impact of tariff uncertainty on business decisions, but there has been a clear downturn in global manufacturing at the same time as the increase in uncertainty. Business are not sure whether to move operations to another country, bring operations back to the US, or hold off on any investment decision. This investment problem is faced by any country interacting with China trade, and the US is not the only country increasing trade barriers. 

Tariffs have ratcheted higher between the US and China with a spillover to all of the countries that are intermediaries in this trade. Exports have declined from highs near the end 2017 and exports from China have sharply declined from 2018 highs. The drag on trade and investment is real and is unlikely to change with a decrease in discount rates.