Here's Why Uncertainty Is An Economic Killer

Stephen Carroll (0:00)

Hi, I'm Stephen Carroll, host of Bloomberg's Here's Why podcast. I'm dropping into your feed because we borrowed Joe Weisenthal for our latest episode while he was in London, so we wanted to share it with you. If you like it, you can subscribe to us wherever you usually listen. There is a link in the show notes. Enjoy.

SPEAKER_2 (0:17)

Bloomberg Audio Studios, podcasts, radio, news.

Stephen Carroll (0:24)

I'm Stephen Carroll, and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg.

Tobias Meyer (0:35)

People are getting really a bit tired. They don't know even if something is announced, whether two days later it's not changed again. So you really see some fatigue of decision makers.

Stephen Carroll (0:46)

That's the CEO of Logistics giant DHL, Tobias Meyer. For executives like him, navigating the near daily shifts in US economic policy, it's like driving through fog with no headlights. When the rules are changing so quickly, it's not just hard to keep up, it's almost impossible to make decisions. Should a company build a new factory, order more supplies, hire more workers, and where to do any of this? And when you don't know what's coming, you hit the brakes.

SPEAKER_4 (1:11)

But we haven't, I don't think, spent enough time talking about just the uncertainty out there.

SPEAKER_5 (1:16)

Operating in this highly uncertain environment means go slow. The higher uncertainty and greater risk of recession.

SPEAKER_6 (1:23)

The fear that on a daily basis you wake up in the morning and not wondering whether which sectors are going to have 25% tariffs, which countries tariffs are going to be at 100%. That's where the damage is caused.

Stephen Carroll (1:34)

So here's why uncertainty is an economic killer. Joe Weisenthal, host of Bloomberg's Odd Lots podcast is with me in London. Joe, great to see you.

Joe Weisenthal (1:43)

Thank you for having me. Thrilled to be here.

Stephen Carroll (1:45)

Tell me with your brain and knowledge of these matters, how can we define uncertainty in this moment in 2025?

Joe Weisenthal (1:55)

Yeah, I mean, it's a great question. And I think there are sort of two different elements, which is, one is, okay, we know there's going to be a change in the trading environment between the rest of the world and the US., right? Like that's obviously a done deal. And nobody knows like what type of arrangements will be profitable in those environments and so forth. So that's a form of uncertainty. But then there's another, you know, the more deeper form of uncertainty is, yes, we know there's going to be a change, but we don't know to what, right? And part of that is, I don't think, you know, the White House has clearly articulated what it wants the new environment to be. There's a message uncertainty because various people speak for the White House on behalf of the White House. And there's a lot of ambiguity about the degree to which anything they say actually reflects the thinking of the administration. And when I say the administration, I only mean the president because, you know, typically one would think there is a coherent message, but I don't think there is. There's, you know, there's rivals within the White House that have different priorities. And I think that even the president himself, while he has some intuitions that, you know, he believes that tariffs are a tool that can be used to revive the US manufacturing sector, the degree to which that policy is cemented seems still very up in the air.

Stephen Carroll (3:20)

Can we say that it's more uncertain now than it has been in years longer? How do we sort of measure uncertainty? I mean, you can look at the markets, for one example.

Joe Weisenthal (3:30)

Well, look, I think, you know, in the two big recent crises that we had, there were clear goals. During COVID, the goal was to stop the spread of the disease, and then from an economic side to sort of replace all the lost money, all the lost economic activity for those months during lockdown. In 2008 and 2009, the goal was to stop a bank run. And there was a lot that they didn't know at the time, and they certainly may have misjudged the speed and scale through which the financial system was deteriorating in 2008 and 2009, but the goal was to stop a bank run.

In this case, as they say, the call is coming from inside the house, and so you don't really know what the goal is. Is the goal to improve our ability to manufacture high-tech things that are important for national security, maybe? Is the goal to fundamentally restructure the economy such that everyone or a lot more people are in what we call production work? Is the goal to stop the flow of fentanyl? Is the goal to slow international migration? So, whereas in the last two crises, there was certainly a lot of uncertainty and there was a lot of debating about, well, what's it going to take and how long will it take to stop the spread of a pandemic or a bank run, et cetera? I don't think we actually even know what the goal is here. And so in some sense, I would say, again, there are various attempts to measure uncertainty. There are market-based measures, there are sentiment-based measures. But I would say there is a degree of uncertainty now that is in a way incomparable to any recent crisis.