Over the past year, the economy has fought a lot of headwinds. Wars of commerce. The lagging impact of the hikes in interest rates of the Federal Reserve. A shutdown of the government. The good news is that the economy may be poised for better performance in 2020 with those hiccups mostly out of the way.
It is difficult to come up with an exact price tag with the trade war. But it certainly gave business morale a hit, and the tariffs affected agriculture, manufacturing, engineering, and consumer goods. What seems inevitable at this stage is that trade tensions in 2020 will not be as detrimental to growth as in 2019. The economy has had to absorb the costs of tariffs over the past year or so while business investment has declined in the face of rising uncertainty. However, by way of comparison, the absence of any change would be beneficial. And there is at least a chance of unwinding some tariffs, which would be a bonus for 2020.
And Boeing Co. can give manufacturing an additional boost if it resumes next year’s sales of 737 Max aircraft. Even if not, the Max will not be a drag on industrial production and factory orders again; the damage caused by grounding the aircraft has already been felt, so the shock is out of the way.
Bring it all together, and by simply not having or reversing some of the negative events of the past year, you have a convincing list of potential positive for growth. For the Midwest as well as the agricultural and manufacturing industries, this news should be especially welcomed, not to mention President Donald Trump.
This does not necessarily mean that financial markets will have a roaring year; arguably, much of this year’s gains have come from the Fed’s shift from hawkish to dovish, and this is already reflected in stock and bond prices. That being said, the circumstances over the past year that created headwinds should dissipate, making 2020 feel much better than 2019.