YOUNGSTOWN, Ohio – The United States’ inconsistent tariff policy has injected a significant amount of uncertainty into the economy, making it difficult for businesses to plan ahead, proceed with new investments or hire new employees, a panel of economists concurred Thursday.
Moreover, current tariff policy could potentially lead to long-term disruption between the U.S. and its other trading partners, one panelist noted.
“We’ve moved into a Wild West of U.S. trade policy,” said David Weinstein, the Carl S. Shoup Professor of Japanese Economy at Columbia University. “This is going to fundamentally realign a lot of trade and political relationships, not just with Europe and Canada, but also in Asia.”
Weinstein joined Kyle Handley, associate professor of economics at the University of California San Diego, and Steven Kamin, senior fellow at the American Enterprise Institute, in a webinar discussion hosted by the Cleveland Federal Reserve’s Center for Inflation Research that explored the potential impact of recent tariffs enacted by the Trump administration.
The event was moderated by Archie Hall, economics correspondent for The Economist.
The administration’s ever-shifting tariff policy – described by President Donald Trump as a negotiating tactic – has nonetheless disrupted trade relationships with countries that in the past had relied on the stability of the U.S. market, Weinstein said. This is particularly evident in Asian countries, he noted.
“When Asian nations talk about risk now, they talk about managing United States risk and de-risking their economy, reducing their exposure to the U.S. economy,” Weinstein said. “They just see it as an unstable trading partner. They don’t know what the rules are going to be.”
Weinstein said this gives China an “enormous edge” in the global market and an opportunity to portray themselves as a stable trading partner. “Whatever the vagaries of Chinese regulations are at this point, it’s nothing like the volatility we’ve been seeing in terms of U.S. trade policy,” he said.
Beginning in February, the Trump administration began enacting tariffs on foreign goods. Earlier, Trump announced blanket tariffs of 10% on most U.S. trading partners; imposed a 145% tariff on China only to then reduce it to 10%, on top of an existing 20% penalty; placed 25% tariffs on all foreign-made automobiles; and another 25% tariff on steel and aluminum.
Add to this a federal court’s opinion Wednesday that ruled most of the Trump administration tariffs as illegal, followed by a federal appeals court ruling Thursday that temporarily pauses the earlier decision, and an even more volatile and confusing situation emerges, added Columbia’s Handley.
“What we have now is basically two-sided uncertainty,” Handley said. “Firms in the U.S. don’t know if they should invest in hiring new workers, invest in new production capacity because they might be protected today, but they don’t know what’s going to happen next week.”
Simultaneously, there are businesses outside the United States that are unsure of whether to import or export because of the tariff situation, he said. “When you have that level of uncertainty, essentially what happens is that firms kind of freeze up and wait to see what’s going to happen and reduce investment,” Handley said.
Handley noted that this lack of investment won’t impact the economy overnight but could have repercussions several years from now. Also, he noted that U.S. tariff policy disrupts conventional agreements that have existed for decades between the U.S. and fellow members of the World Trade Organization.
Handley said many of these agreements were commitments from these countries not to raise tariffs over a specific threshold, which could be just as productive as pledges to lower tariffs. “Sometimes promising not to raise a trade barrier can be just as important as lowering the tariff,” he said. Trading partners, he continued, “want to know their market access is secure.”
Other ripple effects, such as inflation caused by rising costs associated with tariff policy, could also come into play, added AEI’s Kamin, a former director of the Federal Reserve Board’s Division of International Finance.
“Tariffs are a supply shock. They raise costs, which is bad for inflation. They lower output, not good for employment,” Kamin said.
During the first Trump administration, Kamin, who was on the Federal Reserve staff at the time, noted tariffs imposed on specific goods led to price increases. However, prices on those goods that were exempt from any trade penalties remained stable.
The Fed in 2018-2019 had to take into consideration these variables to manage the economy, when the first Trump administration enacted tariffs during that period, Kamin said. Overall tariff impact then, however, wasn’t as damaging as first anticipated, as unemployment remained low and inflation was kept at bay.
“But at the same time, trade policy uncertainty did rise substantially,” Kamin said. “In response to that uncertainty, investment fell off and industrial production fell off,” he said.
However, Kamin noted that businesses might be able to adapt to these changes in the current economic climate, as countries such as China are known for skirting commitments and international trade law. “I wonder whether, eventually, businesses would learn to work with it, and maybe the damage might not be as egregious.”
Still, monitoring the current round of tariffs and forecasting the course of the economy this time around has proven difficult, Handley added.
“Uncertainty is having a negative effect on investment,” Handley said. “I think it’s also likely to make Americans feel worse off. It also affects our ability to forecast, because we simply don’t know what tariffs will be in 90 days.”
Pictured at top: Shipping containers are stored at Bensenville intermodal terminal in Franklin Park, Ill., on April 6, 2025. (AP Photo | Nam Y. Huh)