Wednesday, June 17, 2026 at 11:00 PM
Original source
VoxEU — CEPR
MacroLab briefing generated by AI for informational purposes. Original reporting by VoxEU — CEPR. Not financial advice.
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Recent research from economists studying cross-border investment found that when trade rules become unpredictable, companies invest less money in foreign countries. The study looked at how both actual tariffs (taxes on imported goods) and uncertainty about future tariffs affect how much money firms send abroad to build factories, offices, and other operations. The researchers discovered that uncertainty about trade policy hurts foreign investment even more than tariffs themselves do. Companies are reluctant to spend billions on overseas operations when they don't know what the rules will be next year.
When companies pull back on foreign investment, it affects ordinary people's economic lives in several ways. First, it can slow job creation because fewer factories and offices get built overseas, which can eventually ripple back to fewer jobs at home as supply chains shrink. Second, uncertainty about trade rules makes companies hesitant to expand, which can dampen economic growth in all countries involved. Third, when investment slows, it can eventually affect consumer prices and the range of products available because companies may produce less or in less efficient ways. Finally, stock prices of multinational companies can fall when investors worry about future profits, which affects retirement accounts and savings for many people.
Watch for signs of declining foreign investment numbers from major trading countries. If announcements about surprise new tariffs or trade restrictions keep companies guessing, that's a warning sign. Pay attention to whether companies say they're postponing expansion plans overseas or canceling them entirely. Also watch for economic growth slowdowns in countries that depend heavily on cross-border investment and for stock market weakness among multinational corporations. If trade policy becomes more predictable and transparent instead, investment should recover.