Summary

• U.S. Treasury Secretary Scott Bessent says a sustainable investment boom—driven by tax incentives, tariffs, and AI spending—is reshaping industries and boosting GDP.
• Bessent warned the federal government shutdown is slowing growth, costing about $15 billion daily and threatening investment tied to federal approvals and contracts.
• Forecasters expect continued AI-driven business investment to support growth despite risks like higher rates, tariff costs, and potential global shocks.

WASHINGTON — As global finance leaders gathered for the International Monetary Fund and World Bank annual meetings this week, U.S. Treasury Secretary Scott Bessent struck an upbeat tone on the economy’s hottest trend: a torrent of domestic investment that’s reshaping industries from artificial intelligence to manufacturing.

Speaking at a CNBC “Invest in America” forum on the sidelines of the events, Bessent declared the boom “sustainable and only getting started,” crediting President Donald Trump’s policy playbook for unleashing pent-up corporate demand that’s been building for years.

“There is pent-up demand, but then President Trump has unleashed this boom with his policies,” Bessent told reporters, emphasizing how tax incentives from the Republican-led overhaul and Trump’s tariff regime are acting as rocket fuel.

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He likened the moment to historic inflection points, like the late 19th-century railroad expansion or the 1990s internet revolution, where bold infrastructure bets paid off in waves of productivity and growth.

“I think we can be in a period like the late 1800s when railroads came in, like the 1990s when we got the internet and office tech boom,” he added.

Bessent’s optimism comes at a time when recent economic data underscores the surge’s momentum.

The U.S. Bureau of Economic Analysis reported that real gross domestic product grew at a 3.8% annual rate in the second quarter of 2025, rebounding sharply from a 0.6% contraction in the first quarter, driven partly by a drop in imports and rising consumer spending.

Business investment, particularly in AI and high-tech sectors, has been a standout performer, accounting for roughly half of total fixed investment and running well above pre-pandemic trends since 2021, according to Vanguard’s latest economic outlook.

Early indicators suggest this spending is providing a crucial backstop to overall GDP, with tech-driven capital expenditures helping offset softer spots like housing and exports.

Broader forecasts paint a picture of resilience amid headwinds. Deloitte Insights projects business investment to stay robust through 2025, fueled by AI-related outlays in software, data centers, and computing equipment, even as higher interest rates and tariff costs bite elsewhere.

The firm anticipates real GDP expansion of around 2% this year, with AI spending continuing to accelerate into 2026.

Similarly, Comerica’s October outlook highlights how these long-gestation projects—think sprawling server farms and power grid upgrades—will propel growth well into next year, potentially easing the economy through any near-term turbulence.

Yet Bessent didn’t sugarcoat the biggest drag on this trajectory: the ongoing federal government shutdown, now in its second week.

“The only thing slowing us down here is this government shutdown,” he said bluntly, pegging the daily hit to lost output at about $15 billion.

That’s a stark reminder of how fiscal gridlock can ripple through an otherwise humming economy, delaying permits, payments, and procurement that businesses rely on to scale up.

Analysts Warn of Prolonged Closure

The Congressional Budget Office last week estimated the fiscal 2025 deficit at $1.817 trillion, a slight dip from the prior year’s $1.833 trillion, thanks in part to a $118 billion windfall from tariff revenues—but Bessent stressed the deficit-to-GDP ratio, now starting with a “five,” as the real watchpoint for sustainability.

The shutdown’s shadow looms large over investment plans, especially in sectors tied to federal contracts or regulatory approvals.

Foreign direct investment into U.S. businesses totaled $151 billion in 2024, down 14.2% from the year before and below the 2014-2023 average of $277.2 billion, per BEA data, with acquisitions of existing firms making up the bulk.

Analysts worry prolonged closure could deter that flow further, echoing past shutdowns that shaved tenths off quarterly GDP.

Bessent urged Democrats to “be heroes” and back a clean funding bill already passed by House Republicans, framing it as essential to keeping the investment engine revving.

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American Economy Under the Trump Administration

This isn’t Bessent’s first rodeo sounding the alarm on policy friction.

In earlier remarks, like his April interview with Tucker Carlson, he defended Trump’s tariff strategy as a tool for “sound fundamentals” in the underlying economy, brushing off short-term market jitters—even a 4% dip in the equal-weighted S&P 500—as noise that won’t derail long-term gains.

“In the long run, it’s going to weigh: do we have good policies? Yes,” he said then.

And at a June Ways and Means Committee hearing, he warned that letting 2017 tax cuts expire would trigger a “sudden stop” and the “largest tax hike in history,” shuttering Main Street shops and hammering small businesses that depend on deductions like the 20% pass-through break used by 26 million entities.

The investment narrative ties into broader Trump administration goals Bessent has championed since his January confirmation, where he pitched a “new economic golden age” blending tax relief, deregulation, and strategic reshoring.

Speaking to the Economic Club of New York in March, he outlined “Parallel Prosperity”—a vision where Main Street and Wall Street rise together, powered by community banks that handle 40% of small business loans despite holding just 15% of industry assets.

At a Fed Community Bank Conference in early October, he called on these institutions to “expand your role in the American economy,” positioning them as the backbone for job growth and wealth creation.

What’s Next for the US Economy?

Looking ahead, the IMF’s October World Economic Outlook echoes some of Bessent’s bullishness on U.S. tech investment softening global tariff blows, but it flags risks like a potential AI bubble burst or China’s property woes amplifying trade tensions.

EY’s September update, meanwhile, sees real GDP growth cooling to 1.7% in 2025 from tariff drags and policy uncertainty, with Q4 dipping to 1.2% year-over-year.

FXStreet’s October take is a touch brighter at 2.0% for the year, buoyed by 3.0% annualized personal consumption in Q3 and AI-fueled business outlays.

For now, Bessent’s message is clear: The U.S. is in the “third inning” of a transformative cycle, with 10-20% of the boom tied to reshoring five to seven strategic industries—from semiconductors to critical minerals—that got a dry run during COVID supply shocks.

As Republican lawmakers push Trump’s sweeping spending and tax package through Congress, the hope is that resolving the shutdown will clear the decks for this momentum to build.

If it does, Bessent’s railroad analogy might just stick—putting America back on track for another era of outsized gains.

Also Read: Republicans Face Growing Backlash as Voters Blame Them for Govt. Shutdown

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