Trump's erratic trade policies are baffling businesses, threatening investment and economic growth

PAUL WISEMAN, ANNE D'INNOCENZIO and MAE ANDERSON

Thu, Mar 6, 2025, 10:02 AM 6 min read

WASHINGTON (AP) — Marc Rosenberg, founder and CEO of The Edge Desk in Deerfield, Illinois is getting ready to introduce a fancy ergonomic chair designed to reduce customers’ back pain and boost their productivity. He figures the most expensive one will sell for more than $1,000. But he can’t settle on a price, and he is reluctantly reducing the shipment he’s bringing to the United States from China.

There’s a reason for his caution: President Donald Trump’s ever-changing, on-again, off-again tariff war with America’s three biggest trading partners – Mexico, Canada and China.

On Wednesday, the mercurial president once again changed course: A day after he imposed 25% taxes – tariffs – on all imports from Canada and Mexico, he backpedaled and exempted autos crossing America’s northern and southern borders. Well, for 30 days anyway.

This is after having already postponed his original tariffs against Canada and Mexico in February by 30 days.

Rosenberg and his ergonomic furniture are contending with a 20% tariff on imports from China – which Trump on Tuesday raised from 10% -- but he’s not sure where the tariff will actually land.

“The misdirection is making it very tough to plan for the year,’’ he said.

Tariffs cause economic pain in part because they’re a tax paid by importers that often gets passed along to consumers, adding to inflationary pressure. They also draw retaliation from trading partners, which can hurt all economies involved.

But import taxes can cause economic damage in another way, too: by complicating the decisions businesses have to make, including which suppliers to use, where to locate factories, what prices to charge. And that uncertainty can cause them to delay or cancel investments that help drive economic growth.

“It creates an enormous amount of uncertainty for multinational companies that sell products worldwide, that import from the rest of the world, that run these complex supply chains through multiple countries,” said Eswar Prasad, an economist at Cornell University. “The uncertainty is going to be very unsettling for businesses and ... it will hurt business investment on net.”

During Trump’s first-term trade battles, U.S. business investment weakened late in 2019, convincing the Federal Reserve to cut its benchmark interest rate three times in second half of the year to provide some offsetting economic stimulus.

Trump 2.0 is even more unnerving to business. The first Trump administration imposed tariffs on specific targets — steel and aluminum and most goods from China — after lengthy investigations.