Uncertainty created by ever-changing tariff policies harms U.S. economic growth – Equitable Growth

Report on the Impact of Tariff Policy Uncertainty on Sustainable Development Goals

Impediments to Decent Work and Economic Growth (SDG 8)

Recent international trade policies, characterized by frequent and unpredictable tariff adjustments, have created significant economic uncertainty. This instability directly undermines progress toward Sustainable Development Goal 8, which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all.

• Economic Drag: The perpetual uncertainty surrounding trade rules acts as a drag on economic growth. The Organisation for Economic Co-operation and Development (OECD) projects a slowdown in U.S. economic growth from 2.8 percent in 2024 to 1.8 percent this year and 1.5 percent next year.
• Threats to Employment: Policy ambiguity discourages hiring. A Federal Reserve Bank of Atlanta survey indicates that due to this uncertainty, a significant portion of business executives plan to reduce employment and investment.
• Consumer Impact: Volatile tariff rates, such as those on Chinese goods which fluctuated from 3 percent to as high as 127 percent, are expected to lead to rising consumer prices. This reduces the purchasing power of consumers, further curtailing economic activity and threatening stable growth.

Survey data highlights the direct impact on business planning related to SDG 8 targets:

1. 40 percent of executives plan to reduce hiring.
2. 45 percent of executives expect to scale back capital investment.

Stifling Industry, Innovation, and Infrastructure (SDG 9)

The unpredictable policy environment creates substantial risks for long-term investment, hindering the objectives of SDG 9, which aims to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation.

• Investment Paralysis: The high cost and risk associated with large, irreversible investments lead many firms to adopt a “wait-and-see” posture. This stalls critical spending on projects that underpin sustainable industrialization.
• Suppressed Innovation: Resources that could be allocated to research and development are instead diverted to navigating political and regulatory uncertainty. This leaves young, innovative firms, which are vital for economic dynamism but lack political access, at a significant disadvantage.
• Disrupted Domestic Investment: Firms are discouraged from making domestic investments, such as building new factories or expanding capacity. The instability may encourage relocation or outsourcing over strengthening domestic industrial infrastructure.

Erosion of Institutional Stability and Global Partnerships (SDG 16 & 17)

The pattern of ad-hoc government interventions and shifting regulatory signals undermines the principles of stable governance and international cooperation, which are central to SDG 16 (Peace, Justice, and Strong Institutions) and SDG 17 (Partnerships for the Goals).

Institutional Integrity (SDG 16)

• Weakened Institutions: The lack of a predictable, rules-based trade system erodes faith in effective and transparent institutions.
• Political Favoritism: A blurred line between business decision-making and political influence has emerged, with reports of government equity stakes in private corporations and corporate support being tied to political projects. This challenges the goal of reducing corruption and developing accountable institutions.

Global Partnerships (SDG 17)

• Undermined Trade Agreements: Unilateral tariff actions strain established international trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), and weaken the global partnership for sustainable development.
• Global Market Instability: Retaliatory tariffs and the abrupt closing of foreign markets disrupt global supply chains and discourage international trade, which is a key mechanism for achieving the SDGs.

Exacerbating Inequalities and Long-Term Risks (SDG 10)

The current trade policy environment risks exacerbating inequalities within the country, a direct contradiction to the aims of SDG 10 (Reduced Inequalities).

• Unequal Opportunities: The system appears to favor large, politically connected firms that can secure protection or favorable terms, while smaller, less-connected enterprises are left vulnerable. This widens the gap between established players and new innovators.
• Long-Term Economic Shadow: The most damaging legacy may be the enduring expectation that government can intervene in markets arbitrarily. This long shadow of uncertainty will likely continue to shape how businesses invest, hire, and grow for decades, creating a persistent drag on achieving equitable and sustainable economic outcomes.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth: The article extensively discusses the negative impact of tariff policies and policy uncertainty on U.S. economic growth. It mentions slowing growth rates, reduced hiring, and decreased investment, which are central themes of SDG 8.
• SDG 9: Industry, Innovation, and Infrastructure: The article highlights how policy unpredictability causes a “slow-motion paralysis” in large, irreversible investments such as building new factories and spending on research and development (R&D). This directly relates to the goals of fostering innovation and promoting sustainable industrialization.
• SDG 17: Partnerships for the Goals: The core subject of the article is international trade policy, including tariffs and trade agreements like the United States-Mexico-Canada Agreement (USMCA). The discussion of “ever-changing policies” and a move away from predictable, rules-based trade connects directly to the goal of fostering a stable and equitable global trading system.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Under SDG 8 (Decent Work and Economic Growth):
  1. Target 8.1: Sustain per capita economic growth. The article directly addresses this by stating that the Organisation for Economic Co-operation and Development “expects U.S. economic growth to slow to 1.8 percent this year and 1.5 percent next year, down from 2.8 percent in 2024,” linking this slowdown to the economic costs of tariffs.
  2. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article implies a negative impact on this target by noting that policy uncertainty causes firms to reduce spending on “research and development” and innovation, as they adopt a “wait-and-see” posture instead of improving operations.
• Under SDG 9 (Industry, Innovation, and Infrastructure):
  1. Target 9.2: Promote inclusive and sustainable industrialization. The article describes how the “increasing cost and risk of committing to large, irreversible investments—building new factories, making additional hires” leads to a drag on industrial activity and investment.
• Under SDG 17 (Partnerships for the Goals):
  1. Target 17.10: Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system. The article describes a situation contrary to this target, characterized by an “endless jumble of tariff negotiations and ever-changing policies” and “perpetual uncertainty about the rules that govern” trade, undermining a stable, rules-based system.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• For Target 8.1 (Sustain economic growth):
  • Indicator: Annual growth rate of real GDP. The article explicitly provides figures for this indicator: “U.S. economic growth to slow to 1.8 percent this year and 1.5 percent next year, down from 2.8 percent in 2024.”
• For Targets 8.2 and 9.2 (Promote innovation and industrialization):
  • Indicator: Business investment and hiring plans. The article cites a survey by the Federal Reserve Bank of Atlanta as a direct measure of business sentiment and future actions: “40 percent of executives plan to reduce hiring and 45 percent expect to scale back capital investment over the next 6 months due to policy uncertainty.”
• For Target 17.10 (Promote a rules-based trading system):
  • Indicator: Average tariff rates. The article uses tariff rates as a primary, quantifiable measure of trade policy instability. It states, “the average U.S. tariff on Chinese goods rose from about 3 percent in early 2018 to as high as 127 percent in May 2025, before being reduced to roughly 47 percent.” This directly reflects the level of trade protectionism and policy volatility.

4. Summary Table of SDGs, Targets, and Indicators

Source: equitablegrowth.org