Uncertainty Index Soars Amid Mixed Signals Regarding Trump Tariffs | Money News

If you’re feeling inundated by the flood of news regarding Donald Trump’s tariff strategies lately, you’re certainly not alone.

A recent measure of “policy uncertainty,” which gauges the dominance of specific issues in the news, indicates that current uncertainty levels surrounding trade are the highest they’ve been in decades.

Nonetheless, even this index fails to fully capture the breadth of the uncertainty.

Will the fluctuating tariffs on Canada and Mexico actually come into effect? What about the upcoming tariffs on steel and aluminum? So far, the only tariffs that have been implemented are the additional 10% duties on China that were enacted a few weeks ago.

Moreover, Donald Trump has hinted at an additional 10% surcharge, along with a series of “reciprocal tariffs” primarily targeting the European Union. Keeping track of all these changes is quite challenging.

As a result of this uncertainty, US stock prices have been underperforming compared to their international peers.

Many observers anticipated that, given his previous actions, Donald Trump would avoid decisions that could harm stock prices in the long run. However, the S&P 500 index has fallen over 6% since his inauguration, while Germany’s currency-adjusted index has surged by 12%. Some have termed this phenomenon “the Trump Slump.”

Uncertainty unsettles markets, and inflation—especially that driven by tariffs, which increase costs for imported goods—adds to this discomfort. The question remains whether this economic toll is warranted based on the White House’s intended outcomes.

The publicly stated aim—aside from extracting concessions from countries like China and Canada—is to reindustrialize the US by making it harder for manufactured goods to enter freely. Is that outcome feasible?

For comparison, the last time Donald Trump imposed tariffs on metals, back in 2018, the 10% levy on aluminum did trigger a slight increase in domestic production as smelting capacity was revived.

However, that uptick was fleeting. By the end of his first term, production had reverted to its previous levels, and since then, aluminum output has plummeted to historic lows.

The White House posits that this decline stems partly from the exclusion of certain countries—most notably Canada—from the tariffs and the relatively low tariff level. This is why it’s been increased to 25%. Yet, the aluminum sector argues that Canada should be exempt from this round of tariffs as well. Will these requests bear any fruit? Once again, no one knows.

What is clear is that various sectors of the American industrial landscape—ranging from high-tech manufacturers of aircraft and automobiles to beverage can producers—depend heavily on imported aluminum. In the long term, some businesses might revive old smelters or construct new ones, but this process could take years.

Thus, in the meantime, significant economic distress is likely as the expenses associated with this metal soar.

Additionally, it remains uncertain whether a rational investor would commit the capital to build a new smelter.

The financials may make sense if the tariffs remain in effect, but what assurances exist that they will indeed stay? Given the lack of clarity, the likelihood of investments in this industry is more limited than usual.

Meanwhile, it’s important to note that other nations are retaliating with their own trade measures.

China has imposed restrictions on exports of critical metals such as tungsten and molybdenum—both of which it produces in the largest quantities globally. This will further increase costs for American manufacturers.

Ultimately, the next months and years are poised to be rocky for the American economy. Reindustrializing a nation like the US—or the UK for that matter—is no simple task. Attempting to achieve this rapidly with blunt tariffs adds another layer of complexity.