The New Age of Tariffs: Why Finding Clear Answers is a Fool’s Errand For Now
In a world of unpredictable tariffs, analysts are being asked to solve an unsolvable puzzle.
In recent months, the world of international trade has been anything but stable. With each new round of US tariff announcements, analysts and economists are immediately put on the spot, asked to provide definitive conclusions, not just on the country- and sector impacts but also the global ones. The expectation is that an expert should be able to produce a precise forecast, detailing which sectors will thrive and which will suffer.
The reality, however, is that this is an almost impossible task. The ability to provide such a definitive conclusion is hamstrung by three major factors that introduce a profound level of uncertainty into the global economic system. To demand a simple answer is to ask an expert to ignore the very complexities that define our current trade environment.
First and foremost is the unpredictable nature of the tariff regime itself. Unlike traditional trade policy, which was often a slow, methodical process, today’s tariffs can appear and disappear with little warning. They are not part of something that can be easily modeled. Instead, they are often a series of fluid, tactical moves, subject to sudden changes. This volatility makes it extraordinarily difficult for anyone—from a large multinational to a small business owner—to currently plan long-term investments, let alone for an analyst to create a reliable forecast for what the aggregation will produce.
Second, we are still navigating several ongoing country negotiations. Tariffs are rarely the final word; they are often part of the negotiation journey rather than a destination. The final tariff regime is a moving target, dependent on the outcome of complex discussions between nations. The tariffs announced today may be a bargaining chip that is rescinded tomorrow. Until these negotiations reach a conclusion, any analysis is, by its very nature, based on an incomplete picture.
Third, we have yet to see the full scope of how other governments and companies will respond. The global economy is a complex ecosystem. When one country introduces a tariff, it doesn’t exist in a vacuum. Other nations need to consider whether to retaliate with their own tariffs, or companies may shift their supply chains. The true impact of a tariff is not just the immediate tax on a good; it’s the ripple effect of these responses, which can be slow to materialize and difficult to predict.
Finally, it will take time to assess who pays the cost of tariffs, including the distribution between consumers, foreign suppliers, and their domestic counterparts. This distribution will impact both macroeconomic and distributional outcomes.
Having cited the four reasons, there is something that has become abundantly clear through all of this: The global economy has broken with a multi-decade trend.
For decades, the world moved steadily toward a system of lower and more uniform tariffs across countries. Now, we have shifted into a new era defined by higher, less uniform, and more volatile tariffs.
