“It almost feels like we’re trying to rebuild everything from scratch,” Michael Wieder told me.
The company he co-founded, Lalo, sells sleekly designed baby gear, much of it made in China. In his first weeks in office, Donald Trump increased the tariff rate on most of the company’s imported goods by 20 percentage points. In April, he jacked the rate up to 145 percent. Lalo had to stop bringing in products from overseas: Paying the tariff could have bankrupted the company. Trump dropped the rate down to 30 percent this month, but Wieder anticipates falling sales and a year of disruption.
Ask any corporate executive or entrepreneur about the past five months, and they will tell you a story like Wieder’s. Companies are struggling with unstable tariff rates, bond-market swings, canceled federal contracts, rising import costs, and visa challenges. They’re unsure about the economic outlook. They’re unsure about tax rates. They’re unsure about borrowing costs. Last week, Moody’s downgraded American debt, meaning it has less confidence in the country’s growth and capacity to manage its deficits.
This is a year of chaos, so dramatic in its upheaval that it sometimes obscures how weird things have been, and for how long. Over the past half decade, businesses have contended with a pandemic, a recession, an inflationary spiral, and a trade war. They have negotiated swift changes in consumer behavior and input prices and interest rates, as well as significant shifts in policy more broadly, from Joe Biden’s New Deal Lite to Donald Trump’s autarkic austerity. John Lettieri, the president of the Economic Innovation Group, a Washington-based think tank, calls it “the era of thrash.”
The American economy has weathered that chaos. Despite reams of studies indicating that uncertainty dampens investment and slows growth, today corporate profits are high, the jobless rate is low, productivity has climbed, and new businesses are blossoming. But that resilience may be wearing off, and we may have reached the end of our ability to withstand the disruptions.
Is this spell of uncertainty so unusual? Even after talking with a dozen business owners and experts in recent weeks, I came away unsure. A lot seemed to have happened since COVID. Then again, reciting five years of major events might feel like singing the lyrics to “We Didn’t Start the Fire” regardless of which five years you picked.
As it turns out, economists have ways of measuring uncertainty, by looking at newspaper coverage, stock-market gyrations, and corporate communications. Those measures show that, sure enough, the first half of the 2020s has proved remarkably unstable and destabilizing. “We’ve been through a period of elevated uncertainty,” Steven Davis, of the Stanford Institute for Economic Policy Research, told me. Right now, we are in “a big surge, relative to what was already a higher-than-average base.”
Economists also have ways of measuring the impact of such periods on businesses and the economy writ large. Uncertainty about a country’s growth path reduces consumption and investment, depressing industrial production. Uncertainty about inflation reduces bank lending, cutting down on business expansion and formation. Uncertainty about tariffs weakens supply chains and limits the number of businesses joining a market. The economies of countries with stable policy environments tend to grow faster than those of unstable countries.
Given that research, you’d think that the past five years would have been dull ones for entrepreneurship and growth. The opposite is true. Americans are forming roughly a million more businesses a year now than they were before the pandemic, despite higher borrowing costs. Corporate profits are fatter than they were before the pandemic. Stock prices—a measure of investor optimism about future earnings—have been volatile, but are up 96 percent over the past five years.
“My biggest takeaway from the last five years of a one-after-another series of different kinds of shocks and uncertainties is an appreciation for the astonishing resilience of the U.S. economy,” Lettieri told me, a note of awe in his voice.
Business experts pointed to a few reasons that the chaos leading up to 2025 did not strangle investment or damage growth. For some firms, the coronavirus crisis provided an opportunity by disrupting stodgy markets and upending consumer behavior. Lalo, for instance, benefited from the surge in interest in ordering online, which let it compete with big-box stores that otherwise might have boxed it out. (Now chains such as Target carry the brand.) The pandemic “played to our benefit,” Wieder told me, and the company managed to navigate the surge in inflation and borrowing costs that followed it.
That was, in large part, because the broader governmental response to the pandemic proved to be such a boon for firms and individuals. The Federal Reserve pushed borrowing costs to close to zero. The Trump and Biden administrations spent roughly $4 trillion on support to families and companies, canceling student loans, sending out checks, covering payroll, supporting the parents of young children, and shoring up the coffers of state and local governments. Even as interest rates rose, the private-credit markets remained robust. “It’s easier to absorb an uncertainty shock when underlying economic conditions are strong than when they’re weak,” Davis said. From 2020 to 2024, the underlying economy proved notably strong.
Today’s uncertainty is far more intense and widespread than many businesses anticipated. Wieder and his co-founder had braced for some turbulence when Trump reclaimed the White House. They assumed tariffs on Chinese imports would rise, increasing costs on young families—even if goods like strollers and car seats were excluded from tariffs, as they were during Trump’s first term. They hoped to preempt consumer sticker shock by lowering prices in advance. “It was a really big bet for us,” Wieder said. “We were protecting our consumer and trying to get ahead of it.” But there was no getting ahead of what followed.
The economy is more vulnerable and less resilient than it was a couple of years ago. Interest rates are higher, personal-debt levels have climbed, job growth is slowing, and inflation remains an issue. “A lot of lending was made during a time of very easy credit,” Diane Swonk, the chief economist at the accounting firm KPMG, told me. “Now many of those businesses and consumers are being squeezed. Loans that were once renewed easily are now being denied or subjected to far stricter standards.”
The political instability of the country, whipsawing between two polarized parties, has also left businesses shaky. And now the White House is proactively destabilizing the policy environment, ignoring court orders and usurping Congress’s authority over spending. When it comes to tariffs, the Trump administration is making “arbitrary executive decisions that are in some cases probably unlawful, and perhaps even unconstitutional,” Davis noted. During the pandemic, the country had a democratic government that made reasonable choices in response to a horrific tragedy. Now it has a more and more despotic government making bad choices for no reason. The past five years didn’t prepare us for this.
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