There’s no sugarcoating the current outlook for business in the coming months: the uncertainty of last month has turned into the angst of this month, particularly among key business leaders that policymakers are determined to support: American manufacturers. Whether the “long-term gains” espoused by the President will ever come to fruition, the concern about “short-term costs” is roiling global markets and creating a crisis in consumer confidence.
ISM’s Purchasing Manager Index fell back into contraction territory in March, dropping 1.3 percentage points to 49%. Consumer confidence, as measured by the Conference Board, fell by 7.2 percentage points in the latest index–that’s four months of decline in a row–and the group’s Expectations Index has dropped to the lowest level in a dozen years. And the Fed’s March Beige Book, which reports on current economic conditions across the country, shows some ominous signs. For example, in its business outlook survey, while 18% of respondents said supply chains and 28% said labor supply are currently acting as a moderate or significant constraint on capacity utilization, the majority–54.5%–state that uncertainty is a moderate or significant constraint. And almost two-thirds believe that impacts from uncertainty will worsen over the next three months.
All of this can be laid, of course, at the foot of trade policy. The Fed’s latest index on Trade Policy Uncertainty is nearing 500, roughly double the level it registered under the first Trump administration (which at that time exceeded the average for the last 60 years by ten times). The implications for the impact of the recent tariff announcements on core inflation won’t be known for some months–but Fed Chair Jerome Powell made it clear in a recent speech that while the U.S. economy remains robust, if the tariffs remain in place, prices will inevitably rise and the economy will unsurprisingly slow down in the coming year.
(Updated 4/7/25)
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