WASHINGTON — President Donald Trump has labeled his upcoming tariff announcement as a “Liberation Day” for the United States, although it is unlikely that American businesses and financial markets will be liberated from the ongoing uncertainties linked to his fluctuating trade policies.
The announcement is expected to introduce reciprocal tariffs, where U.S. import duties will match the levies imposed by other countries on American goods. This might resolve some major ambiguities, providing companies with insights into which countries will be affected and the level of duties to expect.
Economists, however, predict continued uncertainty about trade and tariffs in the coming months. Future tariffs could target specific sectors such as pharmaceuticals, copper, and lumber. Additionally, potential agreements with other countries could modify these tariffs, while innumerable details, possibly taking months to finalize, will determine which imports are taxed.
Few experts anticipate that the upcoming announcement will deliver the clarity sought by businesses and Wall Street investors. Kelly Ann Shaw, a former senior White House trade adviser during Trump’s first term, emphasized that the announcement is just the beginning of a rethinking process for the global trading system, which will generate more questions than answers for the foreseeable future.
Currently, a measure of economic policy uncertainty is reportedly at its highest recorded level—except during the pandemic—since it began in 1985, according to a measure maintained by economist Nicholas Bloom of Stanford University and colleagues. Uncertain economic policies often lead businesses to delay major projects and consumers to curb spending.
Bloom indicated that the effect of April 2 would be minimal if the tariff announcement marks the final word on the matter, although he suspects it will be part of a series of continuous announcements. The White House asserts that restoring American manufacturing prowess is essential for national security and economic interest.
Randy Carr, CEO of World Emblem, anticipates that products made in Mexico and Canada will face a 25% tariff. The company, which makes badges and patches, has already informed clients of an 8% price hike. Carr has paused a $9 million investment in AI and online commerce, due to tariff-related concerns.
Existing tariffs already affect imports including cars, steel, aluminum, and all Chinese products. Surveys show considerable uncertainty among manufacturers and even oil executives, who face higher steel pipe costs.
Some firms, like Emerald Packaging, are holding off on investment as well, maintaining manageable cash reserves after learning from the pandemic-induced supply chain challenges. CEO Kevin Kelly emphasized their cautious approach given the unpredictability.
Uncertainty may linger because Trump uses this as a strategic negotiation tool, Shaw noted. The ambiguity allows for ongoing negotiations, which may take months after the reciprocal tariffs are announced, and further reports on international trade policies could influence future actions.
Trump’s fondness for tariffs appears to serve multiple policy goals, including revenue generation, tackling issues like fentanyl trafficking, and reviving manufacturing. Tariffs have also been proposed on countries importing oil from Venezuela, including potential implications for the U.S.
Professor Marc Busch from Georgetown University points out the unpredictability due to tariffs seemingly applied as solutions for diverse problems, predicting more rounds of tariffs.
The duration of these uncertainties poses significant concerns for the economy. Economist Matthew Luzzetti from Deutsche Bank warned that ongoing uncertainty could decrease growth by about 1% for several quarters.
Neil Bradley from the U.S. Chamber of Commerce acknowledged that even with more certainty, the addition of tariffs could still negatively impact the economy. While more clarity allows for adjustments, it doesn’t equate to a favorable outcome when the policies themselves are harmful.