Businesses across the United States are facing massive uncertainty due to President Trump’s unpredictable trade policies. In particular, the ongoing tariff war with China, Canada, and Mexico is creating confusion and hesitation among business owners who are unsure of how to proceed with investments, pricing strategies, and supply chain decisions.
Take, for instance, Marc Rosenberg, the founder of The Edge Desk, a company in Deerfield, Illinois. He plans to launch a new ergonomic chair aimed at relieving back pain and boosting productivity. But despite the anticipated success, Rosenberg is unsure of his pricing strategy due to the unpredictable tariffs on Chinese imports. The back-and-forth nature of these trade policies is forcing businesses to rethink their strategies and delay decisions that could drive economic growth.
This blog post explores how Trump’s trade policies are affecting businesses, causing inflationary pressures, and leading to investment delays due to the tariff uncertainty. Let’s dive into how these erratic trade moves are causing confusion for businesses across the country.
Trump’s Tariff Policies: A Recipe for Uncertainty
Tariffs – taxes imposed on imported goods – can have significant consequences on the economy. Though they are often touted as a way to protect domestic industries, tariffs increase the cost of imported goods, which in turn drives up prices for consumers and creates economic volatility.
Under Trump’s administration, the tariff war has been a moving target. Just two days after imposing 25% tariffs on imports from Mexico and Canada, Trump decided to suspend most of the levies on Mexico for a month. His reasoning? It was unclear. It’s this kind of back-and-forth decision-making that is frustrating businesses.
For Rosenberg, and many other entrepreneurs, this is a daily struggle. His company imports products from China, and the 20% tariff imposed on Chinese goods has made it nearly impossible to plan for the year ahead. “The misdirection is making it very tough to plan for the year,” Rosenberg says.
The uncertainty caused by tariffs extends far beyond individual businesses. Large companies and multinational corporations are also feeling the effects of the ever-changing trade landscape. Unpredictability in tariffs makes it challenging for businesses to decide where to source products, what prices to charge, and where to set up manufacturing plants.
The Real Impact of Tariffs on Business Investment
One of the major consequences of the tariff uncertainty is a slowdown in business investment. Companies that are unsure of what their costs will be or how tariffs will affect their bottom line are delaying or cancelling investments. Uncertainty leads to inaction, and this has far-reaching implications for economic growth.
According to Eswar Prasad, an economist at Cornell University, businesses are hesitant to make long-term commitments in such a volatile environment. He notes, “The uncertainty is going to be very unsettling for businesses and it will hurt business investment on net.”
This phenomenon was already evident during Trump’s first term, as U.S. business investment weakened late in 2019, prompting the Federal Reserve to cut interest rates three times in the second half of the year. The effect of tariffs on business uncertainty could be a major drag on economic growth in Trump’s second term.
Trump’s Trade Policy: A Shift in Strategy
During Trump’s first term, his administration imposed tariffs on specific targets like steel and aluminum and most goods from China, following lengthy investigations. However, in his second term, Trump has ramped up his tariffs and invoked his national emergency powers to impose tariffs on Canada, Mexico, and China. This move has further expanded the scope of the tariffs, making it harder for businesses to predict the future.
One of Trump’s most erratic moves was his attempt to impose tariffs on auto imports from both Mexico and Canada, despite the fact that he had previously negotiated a North American trade deal with both countries in 2020. By imposing these tariffs, Trump undermines the agreements he himself negotiated, and this creates further uncertainty for businesses operating in North America.
Businesses Are Struggling to Make Plans
In response to Trump’s unpredictable tariff policies, businesses are now facing significant delays and changes in their plans. Take John Gulliver, president of the New England-Canada Business Council, who says, “The tariffs are putting everybody off balance because of their unpredictability and uncertainty.”
Many companies are pausing their investment decisions or reevaluating their budgets because they are unsure of how tariffs will impact their costs. Taylor Samuels, owner of Las Almas Rotas, a bar in Dallas, has had to reconsider his plans for a new restaurant because of the uncertain impact of tariffs on construction materials like steel and lumber.
Similarly, Sandya Dandamudi, the owner of GI Stone in Chicago, works with developers on large projects like high-rise buildings and hotels. Due to uncertainty surrounding tariffs on materials, Dandamudi explains that “those budgets will be blown,” forcing companies to either pass the costs on to customers or cancel projects altogether.
Even Holly Seidewand, the owner of First Fill Spirits in New York, is facing significant challenges. She had plans to expand her business by increasing inventory and adding more products. However, due to the tariffs on Canadian whisky, her growth plans have been put on hold.
How Tariffs Are Hurting Small Businesses
Small businesses are bearing the brunt of Trump’s tariff policies. Many small companies are not in a position to absorb the increased costs caused by tariffs and are forced to raise prices or cancel projects altogether. Rosenberg, whose company relies on imports from China, points out that even with China’s tariffs being raised, he simply doesn’t know how his products will be priced in the future.
Moreover, smaller businesses may not have the same resources or flexibility to adapt to the ever-changing tariff environment. Gi Stone’s Dandamudi adds, “The tariffs will be devastating for small businesses like ours.” For many, the instability surrounding tariffs is forcing them to rethink their operations and approach to growth.
The Bottom Line: A Nation in Limbo
In conclusion, Trump’s trade policies are wreaking havoc on the economy, leaving businesses unsure about how to plan for the future. Whether it’s the tariffs on China, Mexico, or Canada, or the unpredictable nature of these levies, companies are struggling to adapt.
From the ergonomic chair maker in Illinois to stone suppliers in Chicago, businesses are asking for stability. They need clarity on tariffs, trade agreements, and long-term policies that will allow them to make informed decisions and invest in growth. Trump’s erratic tariff strategy is not just creating confusion—it’s holding back the nation’s economic potential.
Photo credit: Transport Topics
