Research shows that economic uncertainty leads to more cautious consumers, delayed investments, and even strategic paralysis. To prevent an economy from stalling during periods of unpredictability, trust plays a vital role
Our latest Economic Policy Uncertainty (EPU) Index clearly shows a sharp rise in policy unpredictability – from tariff shocks to budget upheaval. Yet, the index itself does not tell us how people, firms and organisations react. Those interested in this topic will find compelling evidence in decades of research showing that increased policy uncertainty leads to delayed investments and more cautious consumer behavior.
Another way to understand how (publicly listed) companies respond to uncertainty is by analyzing earnings calls and analyst reports. We’ve published the findings of this analysis in our report on the Economic Policy Uncertainty Index. The findings from that research are clear: since April of this year, when Trump announced his tariff increases, we’ve seen companies shift away from long-term strategies, opting instead for short-term or tactical responses such as price adjustments or simply postponing decisions. Uncertainty, in other words, also leads to strategic caution. This deteriorating investment climate is a recurring theme in our conversations with businesses.
The question, then, is what keeps the economy on track when uncertainty clouds the outlook. The answer is trust. In fact, trust becomes more valuable and more necessary precisely when uncertainty is at its peak.
Trust lowers transaction costs, especially when policy is unclear
In economic theory, particularly in transaction-cost economics, trust is an unspoken enabler. Nobel laureate Oliver Williamson showed that when trust is absent, the costs of negotiating, monitoring, and enforcing contracts soar; when it is present, those costs shrink.
In normal times, clear rules and stable expectations help govern transactions. But during moments of economic uncertainty - like the current period marked by global tariff volatility and domestic policy turbulence - those rules no longer feel reliable, our clients tell us. The future looks murky, forecasts are fragile, and legal clarity is in flux.
Trust as a substitute for uncertainty
In that context, trust becomes a substitute for certainty. It allows companies, investors, and citizens to act even when they don’t have full information. It is, in effect, ‘economic oxygen’, sustaining transactions that would otherwise suffocate.
Studies consistently show that policy-related uncertainty depresses investment, hiring, and consumer spending. The mechanism is intuitive: if you don't know what the rules will be tomorrow, it makes sense to wait. Yet trust changes that calculus, as it diminishes the need to ‘wait and see’. Trust, in this sense, reduces the option value of waiting - a core driver of economic paralysis during uncertain times.
The paradox: trust is hardest to build when we need it most
Yet in these moments of hesitation, trust becomes a differentiator. Firms that have built trust with suppliers, regulators, customers, and even competitors find it easier to navigate uncertainty. They are granted the benefit of the doubt, obtain quicker approvals, and secure more flexible terms.
The challenge, of course, is that trust cannot be built overnight. As we argued in an essay published this February, building trust requires consistency, openness, and dialogue - all of which are harder to maintain when everyone is scrambling to adapt.
A call to action for leaders
If you’re a business leader, policymaker, or investor, this is the moment to double down on trust, not because it’s a ‘soft’ virtue, but because it’s an economic asset:
Be transparent, even when the answers are incomplete. In uncertain times, people don’t expect perfection; they expect honesty.
Invest in relationships, not just processes. A watertight contract may protect you when things go wrong, but a trusted partner can help you avoid going wrong altogether.
Foster internal trust. Employees perform better and adapt faster when they trust leadership, especially when the road ahead is unclear.
PwC’s latest CEO Survey found that nine out of ten Dutch CEOs have already taken concrete actions to restore public trust from transparent reporting to open stakeholder dialogues. This isn’t just about reputation; it’s about resilience.
Trust is not a luxury, it’s a strategy
It’s tempting to treat trust-building as a brand initiative, separate from day-to-day operations. But in a world where economic policy uncertainty is rising and harder to predict, trust becomes a core enabler of action. It reduces friction, accelerates collaboration, and empowers bold moves even in ambiguous conditions.
So, let’s treat trust not just as a value but as a strategy - for navigating uncertainty, enabling decisions, and sustaining growth when the map no longer matches the territory.
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