The dust is still being settled a month after the U.S. President Donald Trump’s “Liberation Day.” He was never coy about his desire to wield tariffs to achieve his geopolitical goals. Both in his previous administration and on the campaign trail, he promised that they are the way to rebuild American manufacturing and repair trade imbalances.

However, between the worst stock sell-off since the pandemic and the reactions from decades-old allies and partners, Trump’s tariffs have widely destabilizing. The uncertainty that it is forcing businesses to operate under will only further hurt the American economy.

In response Trump has retreated from his initial effort to post huge tariffs on all countries. However, he has retained his 10% universal tariff while also deciding that a trade war with China (complemented with a whopping 145% total tariff rate) was the right move.

Since then, exceptions have been granted to certain industries and Trump has claimed that over 200 trade deals are in the works with other countries, although he hadn’t given specifics about any of the deals other than saying they will finish negotiations over the next month. It’s even unclear if the U.S. and China are having negotiations regarding their trade war, as Trump and Chinese officials contradict each other.

Analysis
It is widely understood by economists that uncertainty is bad for business; it makes businesses more reluctant to hire and invest, and leads to lower sales on top of the actual price that tariffs extract from importers. If they don’t know how the future is going to look, why forgo having flexibility to adapt to rapidly changing circumstances?

This uncertainty, coupled with the pace at which Trump makes these policy pivots, is making business leaders looking into the long-term are wary of making the normal long-term investments that stimulate the economy. Expanding locations, placing bulk input orders from abroad, hiring more staff; all of these moves, which generate economic activity, start getting second-guessed by business owners.

Companies that import the materials for their products also are about to face widespread supply chain disruptions. The tariff price in many cases will get passed onto the consumer, but in many cases, the imports might not happen at all, because the tariffs are simply too high. Even just receiving foreign materials will be impacted, as the Los Angeles port expects a 35% drop in cargo from Asia starting in May.

While it is certainly true that there are big name companies that have announced huge investments into the U.S. moving forwards, namely Apple’s $500 billion pledge over the next four years, those investments will take a long time to bear any fruit. The global economic landscape can change drastically between then and today, as Trump himself has shown.

“We will have to pull every lever we have in our arsenal to mitigate the impact of tariffs,” said Procter & Gamble’s Chief Financial Officer, Andre Schulten, on a media call with Reuters. His company is waiting on stability to make any changes, because those decisions often have “a lead time of multiple months, sometimes years and reversing them has similar lead times.”

And that hesitation doesn’t just affect domestic companies. Foreign companies looking to invest in the U.S. are hitting the pause button, eyeing how demand and inflation in the U.S. are going to be affected with tariffs constantly looming.

By taking the U.S. down this road, Trump is tying a tourniquet around the investment from both abroad and at home that could be key in what Trump claims he wants to do: bring back American manufacturing. While some major companies are pledging investment in the U.S., the smaller business owners who Trump claims to be looking out for are being thrown onto their back foot by his tariffs and his manic policy backpedals.

Until these tariffs are stabilized, and the Trump administration remembers that economic ambiguity is contractionary, the American economy will begin to lose its premier position, and the doorway for a new economic order that rips the U.S. off of its pedestal inches further and further open.

Engagement Resources

• The International Monetary Fund is a global organization that offers policy advice, research data, and financial assistance to over 191 nations.
• The Peterson Institute for International Economics is an independent, nonprofit think tank that focuses on researching the global economy.
• The Global Business Alliance is a non-profit that advocates for international companies investing in the U.S., and tracks the current tariff landscape.