Yet policy uncertainty continues to pose significant burdens on businesses across the United States. Further, it dramatically complicates their ability to plan long term for investment and hiring decisions. As the Trump administration’s tariff policies fluctuate, economic analysts warn that this instability may risk tipping the U.S. economy into a downturn.
As Brett House, a professor of professional practice at Columbia University, tells us, the problem with these policies is their unpredictability. This new unpredictability is driving businesses to rethink the way they calculate costs and benefits. “Companies always have risks ahead of them. They can price those risks in terms of the cost of lending or borrowing and the prices of goods or services,” said House. He reiterated that these times of uncertainty have a chilling effect on business activity. Consequently, it’s virtually impossible for companies to accurately forecast costs and establish pricing models for the future.
Gregory Brown, a finance professor at the University of North Carolina, confirmed the reality of policy uncertainty, stating, “It has to be nerve-racking for people on the front lines of this in terms of having their businesses or jobs highly affected.” It’s just that big policy changes that come out of the administration or judiciary can make a big difference to companies financially,” he continued.
Lingering worries over trade have contributed to a drop in CEO confidence. According to the Conference Board’s monthly Consumer Confidence survey, this confidence has plummeted to its lowest point since 2022. As recently as March, over 50 percent of surveyed CEOs indicated that they expect things to get worse in the next six months. This follows the same sentiment from a recent University of Michigan survey. It indicates that consumer attitudes are quite a bit worse than even four months ago, as tariffs began to come into play.
Recent court rulings have thrown President Trump’s steepest tariffs into limbo. This introduces a further layer of uncertainty for U.S. businesses that makes the damage caused by these tariffs all the more difficult to unpack. Fifty-eight percent of companies say they are freezing their hiring plans. They fear that new, local levies would lead to bad fiscal decisions.
Goldman Sachs CEO David Solomon articulated concerns about the potential damage arising from the murky economic outlook, stating, “This uncertainty around the path forward and fears over the potentially escalating effects of the trade war have created material risks to the U.S. and global economy.”
Consumer spending accounts for more than three-quarters of U.S. economic activity. If consumers lose their shopping stomach, it would deepen the economic crisis we’re all experiencing. The Trump administration has maintained that its fluctuating tariff approach provides leverage in trade negotiations, attempting to mitigate criticism regarding its inconsistent policies.
Experts like Jadrian Wooten, a professor of economics at Virginia Tech University, and others have highlighted the negative ramifications of prolonged policy uncertainty on businesses. “These pretty significant policy changes – whether they’re coming out of the administration or the courts – can have a big financial impact on companies,” Brown reiterated.
Despite the challenges posed by unpredictable policy landscapes, some analysts suggest that companies may find ways to navigate these risks. House noted, “In a period of uncertainty, it’s hugely chilling of business activity because there’s almost no way to anticipate what the price of an activity should be.” He went on to talk about needing to change your strategy in an unpredictable world. As you know, faster profits can become losses, and so businesses need to remain nimble.
