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Businesses across the world are hesitating to make significant investment decisions because of rising global policy uncertainty due to tariffs and geopolitical conflicts, according to a report released by SBI Funds Management.
The report highlighted that the Global Economic Policy Uncertainty Index, which reflects concerns around global policymaking, has spiked to its highest level since records began in April 1997. The index, which is adjusted using current price GDP weights, shows a steep upward trend in recent months, especially in April 2025. The index has now crossed the 600 mark, signalling extremely high levels of uncertainty in the global economy. SBI's report points to a mix of global events and policy unpredictability as key reasons behind this trend. "Global uncertainty remains elevated amidst geopolitical tensions and trade negotiation setbacks," the report said. It noted that although there was some moderation in uncertainty recently, it still remains much higher compared to the past decade. One of the major concerns is how trade negotiations with key global partners will evolve. There is also uncertainty around possible retaliatory measures and whether the Supreme Court might invalidate some of the tariffs currently in place. The report further stated that the rise in uncertainty is making businesses cautious. Many firms are delaying or reconsidering their investment plans due to fear of adverse policy changes or geopolitical shocks. Key global events in recent years have added to this environment of doubt. The first round of the US-China trade war under President Trump, Brexit, the COVID-19 pandemic, the Russia-Ukraine war, and ongoing tensions in the Middle East have all played a role in pushing the uncertainty index higher. The report also mentioned that business sentiment deterioration is often accompanied with reduced capex activity. Government infra thrust is plateauing. It also added that this is coupled with threats of global growth moderation owing to tariff policies. It stated, "Even if tariffs weren't to materialize in a meaningful way, the threat and uncertainty of it would dent the global business cycle". The report concludes that unless there is more clarity in global policymaking and trade relations, businesses are likely to remain hesitant in taking bold investment steps. (ANI)
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