New York
CNN
—
The Tariff Man sequel is proving to be even more confusing and chaotic than the original.
Each week, new tariffs are threatened against friends and foes alike, on an ever-growing list of products. Administration officials hint at compromises, only to be contradicted by the boss.
Some tariffs kick in. Others fade away after “very good” phone calls. And yet others are watered down after complaints from CEOs.
It’s hard to imagine a more perplexing backdrop for businesses trying to make decisions about the future. Should they hire or fire workers? Should they expand or retreat? Will they need to raise prices or can they hold steady?
“It’s frustrating and stressful,” Trevor Frampton, who owns a feed and pet supply store in Santa Rosa, California, said of the back-and-forth nature of the tariff threats.
Frampton told CNN he’s monitoring the trade developments closely because he fears these import taxes will force him to lift prices on pet food and other items at a time when many customers are already feeling financial pressure.
“Tariffs are on and then they’re off again. I can’t keep up with it,” he said. “It’s the uncertainty of everything. Is it going to happen? If it is, just do it. Personally, I think it’s stupid.”
Trade policy uncertainty, as measured by an index that counts news articles mentioning the topic, spiked after President Donald Trump won election in November.
That index has kept surging, surpassing not only what was seen during Trump’s first term but at any point since tracking began in 1960.
The spike makes sense given the sheer scale of Trump’s trade agenda this term. It’s like the first term’s trade policies were put on steroids.
Consider that over the past month Trump has lobbed tariffs on $1.4 trillion of US imports. That’s more than triple the $380 billion of goods hit by tariffs during Trump’s entire first term, according to the Tax Foundation.
Of course, the uncertain nature of Trump’s trade plans appears to be a feature, not a bug.
Trump views tariffs as the ultimate way to gain leverage over other nations. By keeping the world guessing on his trade plans, he can maximize that leverage, all while retaining much of the power himself.
Still, all of this chaos is rattling the increasingly turbulent stock market and starting to show up in economic reports.
Consumer confidence has tumbled, consumer spending declined in January by the most in nearly four years and a key Federal Reserve GDP forecast turned sharply negative.
“It feels like the economy is gagging on the uncertainty. And the longer the uncertainty hangs around, the more likely the economy is going to start choking,” Mark Zandi, chief economist at Moody’s Analytics, told CNN’s Kate Bolduan earlier this week, referring to not just trade uncertainty but that over taxes, immigration and federal budget cuts.
Private-sector hiring slowed sharply in February, according to ADP, a slowdown that the firm blamed in part on “policy uncertainty.”
Small businesses with fewer than 19 employees cut jobs; so did firms in trade/transportation/utilities (-33,000), education/health services (-28,000 jobs), information (-14,000 jobs) and natural resources/mining (-2,000 jobs).
“Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead,” Nela Richardson, chief economist at ADP, said in the report.
Businesses have recently expressed growing concern about trade policy, according to the “Beige Book,” a summary of economic conditions released Wednesday by the Federal Reserve. Executives in “most” Fed districts said they expect potential tariffs would cause them to raise prices, with “isolated reports” of firms raising prices “preemptively.”
Manufacturers have reported the “back-and-forth tariff talk has been stressful and that the heightened uncertainty is highly disruptive,” according to the Beige Book.
The Institute for Supply Management on Wednesday reported a notable increase in prices paid by service-sector businesses in February amid “anxiety” over tariffs.
“There is great uncertainty about future business activity due to the risk of tariffs and other potential government actions,” one firm in the agriculture, forestry, fishing and hunting space said in the ISM survey.
Another accommodation and food services business noted that tariffs have “created chaos” in pricing and other metrics that make it hard to forecast future demand.
“Tariffs are going to have a ripple down effect that could severely harm our business,” one information sector firm said.
Consider the rollercoaster ride in the auto industry alone.
General Motors, Ford and Chrysler owner Stellantis saw their share prices tumble on Monday and Tuesday as Trump went forward with 25% tariffs on Canada and Mexico.
Ford CEO Jim Farley warned recently that such import taxes would cause “a lot of cost and a lot of chaos” for automakers because of how closely integrated North America is.
The tariffs could spike the cost to produce North American vehicles by $3,500 to $12,000, according to Anderson Economic Group.
By Wednesday afternoon, the tariffs auto CEOs feared had disappeared – for now.
GM, Ford and Stellantis shares spiked after the White House announced a one-month exemption for autos from tariffs on Mexico and Canada.
Of course, that means that in a month tariffs could still be slapped on cars and car parts if no broader deal with Canada and Mexico is reached by then. And cars could still be hit by threatened auto tariffs, April 2 reciprocal tariffs and steel and aluminum tariffs that are on the way.
