Tariff Cloud May Weigh on World Even After Extended Talks

Uncertainty about the terms under which trade will be conducted is a headwind for the global economy, but complete clarity is unlikely to be available to businesses even after freshly extended negotiations.

- Paul Hannon

President Trump Monday signed an executive order extending the date when his so-called reciprocal tariffs would take effect, with a pause previously scheduled to expire at 12:01 a.m. Wednesday.

Economists expect higher tariffs to directly impede economic growth by weakening demand for goods in the U.S. and exports to that country from the rest of the world. But uncertainty also comes with a cost as businesses delay decisions to invest or hire while they seek clarity on their access to the world's largest market. The extension announced this week, as many businesses had hoped. But it also allows time for governments to negotiate tariffs that are lower than those Trump set out on April 2, and then paused.

"Prolonged negotiations extend the uncertainty which is likely holding back investment decisions in the U.S. and its trading partners," said Holger Schmieding, chief economist at Germany's Berenberg Bank. "However, the new timeline also strengthens the view that Trump will be flexible in the end."