The cost of policy uncertainty on investment

The cost of policy uncertainty on investment

• 16 April 2026

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Economic policy uncertainty has a measurable negative impact on global investment. In 2025, uncertainty had eclipsed tariffs to become the leading constraint on business investment, according to the 2025 ICC Chamber Pulse Survey.

This report by Oxford Economics, commissioned by ICC, quantifies the impact of economic policy uncertainty on business investment across ten geographies: Brazil, Canada, China, EU-4 (France, Germany, Italy and Spain), India, Japan, Mexico, South Korea, the United Kingdom and the United States.

The findings make clear that the costs are already substantial. The risks for 2026 are larger still, with projected investment losses potentially nearly doubling if economic policy uncertainty intensifies.

Economic policy uncertainty hit record highs in 2025

Economic policy uncertainty surged sharply in 2025 to almost 3.5 times its historical average, the highest level on record. This increase was abrupt rather than gradual, concentrated in the first half of 2025 and driven primarily by volatile trade policy, culminating in the 'Liberation Day' tariff package, announced in April 2025.

Uncertainty levels in 2025 exceeded those observed during both the global financial crisis and the early stages of the COVID-19 pandemic.

Global investment stalls under the weight of uncertainty

Policy uncertainty wiped out an estimated US$202 billion in business investment in 2025, reducing investment growth to 0.4% - less than a quarter of its potential pace in the absence of the uncertainty shock.

The impact varied significantly across economies, reflecting differences in trade exposure and sensitivity to policy volatility:

• Canada and Mexico were hit hardest in percentage terms, with investment estimated to be 6.8 % and 5.3 % lower than the counterfactual, respectively. These losses amount to between one third and one half of the contractions seen during the global financial crisis and the COVID-19 pandemic.
• The United States recorded the largest loss in nominal terms - at US$74 billion - even as an AI-driven investment boom partly masked the drag.
• South Korea suffered a double hit from domestic political turmoil and rising trade pressures.
• Brazil and India's large domestic markets provided partial insulation from short-term external shocks. In Brazil, however, investment responses tend to lag - meaning the impact may still be unfolding in 2026 and beyond.
• The EU-4 and Japan, both large and diversified advanced economies, limited investment losses to around 1% relative to the counterfactual.
• China's investment proved comparatively more resilient compared to its Asian counterparts and North American economies, as firms have adapted to persistent policy volatility and elevated uncertainty since 2018.
• The United Kingdom proved the least affected, buffered by a service-led investment profile and lower exposure to US trade policy.

The 2026 business investment outlook: stakes are rising

The analysis points to a US$630 billion gap between alternative investment paths for 2026, highlighting the scale of what is at stake and the central role of policy clarity.

Early indications suggest that policy uncertainty is likely to remain high in 2026. If policy uncertainty uniformly rises further across all 10 economies, business investment could fall by an estimated 2.7% equivalent to US$380 billion (or 100% of FDI inflows to North America in 2025). However, if greater policy clarity emerges, investment in 2026 could instead rise by 1.8%, delivering an additional US$252 billion.

The bottom line is that no country is insulated. While smaller, open and trade-exposed economies are disproportionally affected, even large and more diversified economies face substantial losses. This reinforces the importance of clear, consistent and predictable policy signals in sustaining business investment.