When the only certainty in the economy is uncertainty, it becomes difficult for businesses to ramp up investment.
It’s hard for a manufacturer, for example, to fulfill a major commitment to build an assembly plant that relies on foreign-sourced components if trade taxes suddenly make the input costs surge.
The solution, then, is to wait, and not invest.
That’s just one example of the pervasive impact of ever-changing trade policies on business investment decisions.
We are tracking this increasingly sour sentiment among business leaders in our RSM US Composite Business Confidence Index, which has plummeted since January as tariff uncertainty began to ripple through the economy.
Regardless of whether tariffs ultimately help or hurt American companies, policy uncertainty is one of the most damaging forces to business confidence—an essential driver of investment planning and long-term strategy.
Read more of RSM’s insights on the economy and the middle market.
As product supply chains grow ever more complex, the global disruptions witnessed during the pandemic revealed that most American businesses are not equipped to react quickly to sudden changes in trade policy.
If this level of uncertainty persists, we should expect investment spending to begin to crater—especially as rising prices start to erode overall demand.
And from now until July, when the 90-day pause on reciprocal tariffs reaches its deadline, there’s little reason to expect anything but more volatility weighing on overall market sentiment.
The index
The index is a weighted combined index of widely used business sentiment indexes:
- PMI Manufacturing and Service Index from the Institute of Supply Management.
- Composite PMI Index from S&P Global.
- Small Business Index of Good Time to Invest from the National Federation of Independent Business.
- Small Business Outlook Index from the National Federation of Independent Business
- Dallas Fed manufacturing Outlook
- Richmond Fed Manufacturing Index
- Empire State Manufacturing Index
- Philadelphia Fed Business Index
- Kansas City Fed Index
- New York Fed Business Leaders Survey
