Firms tend to hold back from investment when they are unsure what the policy landscape will look like – as the UK learnedduring several years of Brexit wrangling. ado Ruvić/ReutersFirms tend to hold back from investment when they are unsure what the policy landscape will look like – as the UK learnedduring several years of Brexit wrangling. ado Ruvić/ReutersAnalysisTrump tariff threats are bad, but the uncertainty they instill is much worseHeather StewartThe spectre of rising inflation, slowing global trade and jittery markets has re-emerged as US economic policy divorces itself from any logic Trump threatens 25% tariff on European allies until Denmark sells Greenland Donald Trump’s latest tariff threat, in pursuit of his goal of seizing Greenland, is a political nightmare for European leaders, but it could create a severe economic headache, too. As the International Monetary Fund (IMF) has repeatedly pointed out since Trump’s trade war began in earnest last year, whatever the ultimate level of tariffs, uncertainty takes its own toll. And as IMF managing director Kristalina Georgieva put it in October, in the Trump era, “uncertainty is the new normal”. Businesses tend to hold back from new investment when they are unsure what the policy landscape will eventually look like – as the UK learned to its cost during several years of Brexit wrangling after the 2016 referendum. And this latest threat comes just as businesses in the UK and the EU believed they could plan with certainty, after much-vaunted trade deals with the US were struck and signed with ceremony last summer. If Trump goes ahead with 10% tariffs in February – rising to a punitive 25% on 1 June – it will throw sand in the wheels of the economy at a fraught moment, with France deep in a budgetary crisis, and Germany hoping for an economic upturn after stagnating in 2025. For UK chancellor Rachel Reeves, the timing could not be worse, just as she had cause to hope for a modest upturn after a difficult 12 months. Yet, ironically, one of the most significant risks of Trump’s latest tantrum lies at home, with the threat of resurgent prices. The tariffs already imposed over the last year are the highest since the second world war – though lower than Trump initially threatened.
