What’s the Cost of Doing Business Under Trump?

U.S. President Donald Trump says he’s imposing tariffs to incentivize business in the country. During the 2024 election campaign, he even floated the idea of 2,000 percent tariffs, which he argued would swiftly convince businesses to move their operations to the United States.

But the president’s own policies are rapidly making it unsafe to do business in his own country. Until recently, companies only needed insurance against political risks in non-Western countries. Now they’re discovering that they may need such protection in the United States, too. Will underwriters start offering political risk insurance—until now the domain of risky countries from Azerbaijan to Zimbabwe—in America?

“The higher the tariff, the more likely it is that the company will come into the United States and build a factory,” Trump said in an interview in October 2024. The president has repeatedly expressed his love of tariffs. In the few dizzying weeks since returning to the White House, he not only announced sweeping tariffs on Canada and Mexico (and then temporarily walked them back, reimposed them, and suspended them again), but in late February, he said he would impose 25 percent general tariffs on goods from the European Union.

So far, so conventional. But Trump is not imposing tariffs the traditional way, to protect domestic producers exposed to stiff competition from foreign ones. As he has unequivocally demonstrated with the omnibus tariffs on Canada and Mexico, as well as China, Trump views tariffs as a punishment against countries of his choosing.

“President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country,” the White House said in a statement announcing the tariffs on Feb. 1. And regarding the EU tariffs, Trump claimed the bloc was “formed to screw the United States.”

Which countries, and which sectors, will be the next to receive America’s tariff punishment? It’s impossible to predict. It could be countries and industries currently outflanking U.S. competitors, but it could also be something completely different. No wonder companies doing business with and in the United States are getting concerned—so concerned that they’re starting to think about political risk insurance, as I’ve learned from conversations with insurers and other executives.

Such insurance covers companies against politically linked risks including expropriation and war. In 2021, for instance, a company supplying food to the U.S. military in Afghanistan requested payout on its insurance after the Taliban seized its warehouse at Bagram Air Base. The Arab Spring saw numerous claims. Typically, companies only need political risk insurance in non-Western countries: In liberal democracies, there’s little risk of civil war or unwarranted expropriation. With conflict, instability, and authoritarian behavior growing around the world, by early 2024 a whopping 96 percent of multinationals had added new political risk management capabilities, the global insurance broker WTW reported in its 2024 risk survey. Some 72 percent had sustained political risk losses.

And now political risk is growing in the United States. The self-assigned cleanout of the government by the newly created Department of Government Efficiency means that companies face the risk of contracts being canceled for political reasons—and not just future ones but payment for existing contracts. USAID contractors were already owed $2 billion by the U.S. government and will only be paid thanks to a narrow 5-4 Supreme Court ruling on March 5.

Foreign-based companies also face the risk of Trump targeting them to chastise their home governments. In 2021, China did exactly that to Australia: After then-Prime Minister Scott Morrison called for an independent investigation into the origins of COVID-19, Beijing imposed tariffs of up to 218 percent on Australian wine. Now Trump openly says he wants to go after Canadians and Europeans.

That’s not the only U.S. political risk facing companies. If companies were to negatively attract the attention of Trump advisor Elon Musk, he could also attack them on X, on which he has 220 million followers and where he regularly attacks those he considers opponents, whether individuals, government departments, or foreign officials. (“Be quiet, small man,” he tweeted in response to a post by Polish Foreign Minister Radoslaw Sikorski.) That would cause reputational harm to companies attacked—and certain financial harm, too.

Companies are hoping that silence will save them. “Chief executives alarmed by tariffs that could hurt their businesses are on mute,” the New York Times reported on March 6, referring to corporate America’s silence over Trump administration actions that its leaders disagree with.

It’s a political risk of an entirely novel kind, at least in a Western democracy. In the rarefied world of the arts, this reality is having a similar effect. The European School of Ballet has already canceled a summer program in Las Vegas, citing “the current global situation of political instability, with several negative effects on our planned programs.”

And then there’s the risk of politically motivated riots and civil commotion. “Companies have seen Jan. 6, and it’s not unreasonable to suspect such events could happen again,” a senior insurance executive told me. “They want to make sure they have that insured.”

But even if underwriters were to begin offering political risk insurance for operations related to the United States, providing coverage would be extremely difficult. Insurance depends on being able to model risk, and it’s almost impossible to predict—let alone quantify—the policies Trump will introduce and what effects, intended or unintended, they may have. And, as the executive noted, “some U.S. government actions can affect U.S. businesses operating abroad. What we’re hearing from our clients is concern about U.S. government actions affecting their operations abroad. And foreign governments can also decide to retaliate against those actions by the U.S. government.”

Underwriters are under no obligation to insure risks they consider excessive or too unpredictable. In countries such as Brazil or Iraq, for example, the risks can be modeled and are not so immense as to make underwriting a fool’s errand. But insurers have practically stopped underwriting political risk in China, where in recent years authorities have gone after companies including Bain and Jack Ma’s Alibaba empire for crossing often invisible political lines. Political risk underwriters no longer insure in Russia, and they ended coverage in Ukraine weeks before Russia invaded.

That also limits Trumpian dreams of opening up business with autocracies. The United States under Trump wants to establish closer commercial links to Russia. After meeting with Russian Foreign Minister Sergey Lavrov in February, U.S. Secretary of State Marco Rubio declared that an end to the war would be “the key that unlocks the door” for “potentially historic economic partnerships,” the Times reported. But political statements are not enough to convince businesses.

So volatile is Russia that without political risk insurance, only the rarest Western company would dare to invest there. In fact, Russia remains too risky even for most underwriters. “Unless people start feeling totally confident about Russia, I don’t see the market changing,” the insurance executive said. “They’ll need time and confidence.”

The most basic tenet of business is that companies like normality and predictability, and that goes for underwriters, too. Yes, they’re in the business of risk, but they’re not going to go near risk they can’t price. And even though Trump believes he’s acting in the interest of the U.S. economy by punishing sundry foreign entities, his impulsive actions risk convincing firms that the United States is no longer open for business.