The Longer Tariff Uncertainty Lingers, The More It Corrodes The Economy | Global News Avenue

Consumers and business leaders don’t know what President Donald Trump is going to do next, and the longer it lasts, the more it will damage the economy.

According to an economist at Oxford Economics, he analyzed the impact of policy uncertainty on business investment. this Uncertainty of the final result Trump’s In the tariff announcement Senior adviser Michael Saunders and Oxford chief economist Daniel Harenberg wrote in a comment Tuesday that it is expected to reduce U.S. business investment by 4% this year.

They wrote that if uncertainty is reduced, it may rebound soon next year, but if uncertainty remains high throughout Trump’s four-year term, it could drop by 14%.

The study highlights the main way Trump threatens tariffs on trading partners that may affect the economy regardless of the policy eventually becomes effective. Trump has made business leaders, consumers and abroad speculate in recent weeks, announcing tariffs a few weeks ago, Just delay them Or modify them at the last minute. Starting from April 2, new tariffs will begin to take effect.

Economists warn that many of the negative effects of tariffs include higher consumer prices, higher inflation risks, potential unemployment, and the possibility of a recession. Trump administration argues tariffs Enterprises will be encouraged to relocate To the U.S. factory, increase income tax revenue for the government and help negotiate to reduce their trade barriers to other countries.

The only thing we are uncertain is the uncertainty itself

Jadrian Wooten, a professor of economics at Virginia Tech, said that when companies are considering how much they spend on equipment, buildings, research and other projects, they are long-term decisions. Uncertain trade policies may make future risk bets.

“If they don’t know what will happen, you’ll back down, etc.” “This hesitation – whether it applies to businesses that make investment decisions, families that make consumption decisions – if these people start doing this, that’s where you go into a recession.”

For example, last month, Trump announced 25% tariffs on Mexican and Canadian products, and automakers’ long-term plans were bewildered. Companies like GM, Stellantis, Ford and Toyota have factories in all three North American countries and have completed parts that cross the border several times.

Trump exempted most cars from import taxes shortly after the new tariffs were imposed. Until April 2, an analysis by Standard & Poor’s earlier this month predicted that the turmoil would continue into 2025 and put “industry planning at a virtual deadlock.”

The uncertainty on government policies has a huge impact on the economy that researchers have developed methods to measure how many measures are available at any given time. Baker, Bloom, Davis U.S. Trade Policy Uncertainty Index calculates the number of times certain words appear in major U.S. newspapers. In February, the index’s highest speed in data dates back to 1985.

Wooten recalls two other times when the situation was as uncertain as it is now: 2020 after the collapse of the Lehman Brothers and the pandemic began, in 2008. Both times, the economy was sent to recession.

However, the mere uncertainty cannot put the U.S. economy into recession. But this is one of several factors that have led some forecasters to increase their chances of future recession.

Mark Zandi, chief economist at Moody’s Analytics, released on social media platform Monday Monday. “The chances of an economy falling into a recession are very high in the coming year, rising to 35%.