Trade Policy Uncertainty: Insights From A Roundtable

On February 12, my colleague Heather Berry and I moderated a roundtable at the Rayburn House Office Building on trade policy uncertainty and its effects on businesses. The roundtable was part of the “Georgetown on the Hill” series organized by the Center for Business and Public Policy at the McDonough School of Business. Panelists included Angela Ellard, Nonresident Senior Advisor at the Center for Strategic and International Studies and former Deputy Director General of the WTO, Nuno Limao, Wallenberg Chair Professor at Georgetown University, and Sarah Wells, CEO and founder of Sarah Wells Bags. In this post, I would like to highlight some of the main takeaways from the event.

The discussion suggested that we have moved from a world where uncertainty centered on tariff levels to one where it increasingly concerns the rules themselves—how they are set, how they change, and whether they will be enforced consistently over time.

Uncertainty shapes behavior even before policies take full effect. Firms invest in advance—placing orders, building supplier relationships, qualifying inputs, or expanding capacity—without knowing what costs or market access will look like months or years ahead. When policy shifts are broad, frequent, or unpredictable, research has shown that businesses delay or scale back those investments. The economic effects can accumulate gradually, even if they are not immediately visible in headline data.

Uncertainty about trade rules affects not only importers but also exporters. Firms must assess whether foreign markets will remain accessible, whether standards or other requirements will change, and whether trade agreements—current or newly negotiated—will provide durable assurance. Even without formal retaliation, doubts about durability can alter expectations and investment plans.

On the ground, firms experience uncertainty as a series of costly operational choices. Even relatively simple supply chains require months of preparation: safety testing, orders, payments, and shipping all occur long before goods reach a U.S. port. When tariffs or enforcement conditions change midstream, firms may face immediate cash demands and difficult decisions about pricing, inventory, and financing. Diversifying production is costly and complex, involving new supplier networks, redesigned inputs, and significant upfront investment—often without confidence that the new arrangement will remain stable.

For small and mid-sized firms, these constraints can be particularly tight. Limited cash reserves and narrow margins amplify the impact of unexpected policy changes. Lost sales from delayed or reduced inventory compound tariff costs. Although higher uncertainty can dampen foreign competition, fewer new entrants also signal that margins and predictability are insufficient to justify investment.

In this environment, trade policy becomes harder to align with broader goals—whether manufacturing expansion, revenue generation, or strategic competition—because uncertainty itself can deter the investment those goals require.

Existing institutions face challenges and a call for reform. Yet, the United States has benefited from the opportunity to shape a trade governance that extends well beyond tariffs. International rules on standards, intellectual property, services, customs procedures, and dispute settlement provide a stabilizing framework on which businesses rely.

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