Optimism at the top levels of American businesses dipped in the three months through September, with fewer executives planning to hire workers and build new plants as President Trump’s trade war bites into profits.
About 56 percent of the corporate leaders in a Business Roundtable survey expected to expand payrolls, down 2 points from the spring quarter, while the 55 percent forecasting new capital spending fell six points. The overall CEO Economic Outlook Index dipped 1.8 points to 109.3, still well above its historical average of 81.6, according to the organization, which represents 200 of the largest U.S. companies.
The index uses a scale of -50 to 150, with any reading above 50 indicating economic expansion, and gauges sentiment at businesses that, together, employ nearly 15 million people and account for more than 27 percent of U.S. stock market value.
“Contrary to the assertion that new tariffs and trade restrictions are making our economy stronger, almost none of our companies see it as a positive,” Business Roundtable President Josh Bolten, the former chief of staff to President George W. Bush, said on a call with reporters. “These negative effects have important implications, not only for our member companies but their suppliers, many of which are small and medium-sized businesses.”
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The survey’s findings mirror the assessments of C-suite executives during summer earnings calls, many of whom predicted increasing fallout from Trump’s imposition of double-digit duties on metals, levies on $250 billion of Chinese imports and threats to impose levies on auto imports.
While the effect of the tariffs on large U.S. retailers and other companies have been manageable so far, firms that are younger and tinier face greater challenges. Several in regions of the country that supported Trump have already announced job and production cuts. Economists, trade groups, and even GOP lawmakers warn that the administration’s trade tactics threaten to undermine the benefits of last year’s widely-praised tax cuts.
“We are closely monitoring the tariff discussions and are actively working on mitigation strategies,” Walmart Chief Financial Officer Brett Biggs said in August, after the Bentonville, Ark.-based retailer reported a 4.4 percent jump in inventory costs.
Still, economic indicators have remained strong: U.S. unemployment was steady at 3.9 percent in August — around a 50-year low — and quarterly economic growth reached 4.2 percent.
“The negative effects of trade policies are being masked by the overwhelmingly positive effects from good tax and regulatory policy as well as a relatively robust global and U.S. economic picture,” Bolten said on a call with reporters on Monday.
