To prosper, businesses need to take calculated risks. Relocations, hiring decisions and product launches are based, in part, on boardrooms making calls on how economic trends will play out. Yet, in Donald Trump’s America, it is difficult to have any conviction on where the economy will be next month, let alone next year. References to “uncertainty” and “tariffs” have dominated US companies’ earnings calls this season. Executives cannot commit to decisions when the range of outcomes stemming from the US president’s global trade war remains so vast. Numerous businesses including Ford, American Airlines and Mattel have even decided to curb guidance on their sales and profits.
In the three months since Trump’s second-term inauguration, indices of US economic policy uncertainty — based on references in media articles — have shot up well beyond highs set during even the Covid-19 pandemic. The president embraces unpredictability. Last month, Treasury secretary Scott Bessent said that Trump created “strategic uncertainty” to gain leverage in trade negotiations. Stoking frenzied anticipation, more broadly, helps him garner attention. In the past, these tactics may have helped the real estate developer turned media personality to steamroller through deals or boost ratings. But when managing the world’s largest economy, they are deeply damaging.
Trump’s open-ended approach to tariff negotiations, in particular, has sapped American businesses. Year-ahead investment expectations have plunged. Import duties on countries and sectors that could fluctuate by tens of percentage points, in the space of a month or so, make it impossible for executives with global supply chains to plan ahead. Duties are essential components in calculating profit margins and are among the most complex elements of compliance for international organisations.