Whipsaw Trade Policy Is Depressing Foreign Direct Investment by Jonathan D. Ostry

If a country opts for higher trade restrictions to promote its perceived domestic interests, a predictable policy is far superior to a volatile one. As new research shows, uncertainty causes unnecessary and large collateral damage to FDI inflows.
TORONTO—When US President Donald Trump warned business leaders in Davos last year that tariffs were coming, he offered a word of friendly advice: “Come make your product in America” and thereby sidestep looming import duties from the get-go. In the months that followed, Trump’s America First trade policy took shape. The “Liberation Day” tariffs were announced, paused, restored, found to be unconstitutional, and then replaced by duties enacted under different legislation.