How Tariffs Freeze our Economy in an Era of Policy Uncertainty

As tariffs dominate headlines, this article unpacks the hidden economic cost of policy uncertainty and why businesses are prioritizing resilience over efficiency.

Simply put, tariffs are just taxes put on imported goods. Companies have priced goods for centuries; costs are added, and in turn, margins are adjusted. Businesses can calculate the cost of raw materials, interest rates, and other predictable costs. What businesses can’t count on is the price of a tariff, whether it will survive a court challenge, or which country it will hit next. In 2026, uncertainty is a real tax on global commerce and a constant threat to long-term investments that companies would traditionally make.

This year, over half of the 3,500 senior supply chain and logistics executives polled reported expecting “high” or “very high” policy uncertainty. Notably, fewer than half pointed to any one tariff or another as a core threat. The biggest threat to the economy is not any one specific tariff, but the uncertainty of whether a tariff may be imposed. The threat is a fog; numbers are hazy and cloudy as opposed to absolute.  

This metaphorical “fog” that inconsistent policy decisions cast is expensive, as it freezes company decisions. Say a company is looking to build a new factory. Factories take years to plan and a fortune to build. Business executives are choosing not to make any large investments, such as building a factory, against a tariff schedule that might reverse after the next election or get struck down in court, like in 2025, when the Supreme Court invalidated many of President Trump’s Tariffs. With such doubt regarding tariffs, companies may choose to delay any action unless completely necessary, lest their investments are damaged. 

To mitigate the risk of changing tariffs, companies are restructuring their sourcing not around today’s tariffs but around the possibility of future ones.  One 2025 survey of trade professionals found that 65% were changing sourcing patterns, 57% were renegotiating supplier contracts, and 51% were nearshoring or reshoring production. These represent fundamental changes to companies' supply chains. Businesses are changing where they source products and relocating manufacturing and production in preparation for future tariffs and trade restrictions.

Trump’s second term has marked a shift away from globalization. The hidden strain of the tariff age is not the actual costs that the tariffs impose, but the uncertainty of them. Companies are adapting to such frequent rule changes by sacrificing efficiency in favor of survival.