By Aaron Back

The Trump administration's tariff campaign is generating huge uncertainty for businesses that was already becoming a drag on the economy. It will only further intensify in the weeks and months ahead.

Until recently, stock-market investors seemed to be acting on the assumption that most of Trump's threatened tariffs simply wouldn't happen, perhaps believing they represented mere negotiation tactics. They have now been disabused of that notion.

The prospect of disruptive tariffs has already held back many businesses from decisions such as new hiring or embarking on major purchases or investments.

Consider the latest manufacturer survey by the Institute for Supply Management: Its index of activity fell to 50.3 in February, just above the threshold between expansion and contraction. More notably, there were sharp declines in new orders and employment, and even a whiff of stagflation, with the prices subindex surging by 7.5 percentage points to 62.4.

Tariffs were the dominant theme in comments made by surveyed managers. "The tariff environment regarding products from Mexico and Canada has created uncertainty and volatility among our customers and increased our exposure to retaliatory measures from these countries," said one respondent.

The final imposition of feared tariffs would normally at least provide some certainty. The problem now is, managers will need to take even more seriously Trump's myriad of other threatened tariffs. these include a 25% levy on European Union imports, as well as specific tariffs on goods including copper, pharmaceuticals and semiconductors, plus "reciprocal" tariffs on other trading partners.

Add in the inevitable retaliation from trading partners, and that is a dizzying array of things to worry about, which could quickly become paralyzing for business leaders and other decision makers. Don't expect the economy to perform well in those circumstances.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

March 04, 2025 10:12 ET (15:12 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.