About a quarter century ago, my to-be wife introduced me to a card game called Flux. It was popular among the computer science and engineering students in Pittsburgh. Those students, who spent their days agonising over the logic of the code and structures they were designing, needed something a little different. Something so unpredictable that it defied planning and logic. Something where they didn’t have to think, because thinking couldn’t help much.

The rules of Flux change constantly over the course of the game. Cards changing the rules of the game, and even the victory conditions for the game, are part of the game. Every strategy can come to ruin with any card played. Think you have it all in the bag? Not when someone plays “Hand limit zero” before your turn and you must discard all of your cards.

When no one knows what the rules will be in the next round, planning becomes futile.

It can make for a fun game, but it is a terrible way to run an economy.

Businesses deal with uncertainty all the time; it’s part of the game.

Uncertainty is part of normal games too. In poker, you never really know what your opponents are holding. But you know that if you’re playing five-card stud, your opponent won’t claim that a three-card straight-flush is a winning hand, ignoring the other two cards. All five cards count.

That’s normal business uncertainty. You do the best you can with the hand you have, guess what everyone else is doing, and take your chances.

When the rules themselves are in flux, that’s a different game entirely.

Everyone knows, or ought to know, that American tariffs in the 1930s deepened the Great Depression. They likely weren’t the cause of the Depression. For that, look to errors in monetary policy. Tariffs made things far worse.

But recovery took a lot longer than might have been expected. Investment remained low.

Economist Robert Higgs chalked some of the problem up to sheer uncertainty about changing rules of the game. The 1930s were a period of giant policy changes in the United States. Supreme Court rulings decided that federal government policies long-considered unconstitutional were suddenly allowed. And still larger changes looked possible.

He coined the phrase “regime uncertainty” to capture it. Investors could not know whether the institutional regime under which they made investments would still hold when it came time to earn a return on that investment. So, people would delay investment, hoping time would clarify what the rules would be. There is real option value in delay, when regimes are uncertain.

Or, as Kenneth Roose put it, as quoted by Higgs, “the uncertainties created by government policies as to the nature of the economic system which was evolving undoubtedly reduced the number of long-term investment commitments.”

The tariffs announced this past weekend are terrible. Literally trillions of dollars have been wiped off of the stock market. That’s investors making their best guesses about Trump’s tariffs’ effect on future earnings flows for listed companies.

But it’s also a generalised pulling-back in the face of .

You might think that if Trump recanted tomorrow, the problem would be largely solved. But it’s far worse than that. The underlying regime is uncertain. Unless Congress takes away the President’s ability to impose tariffs at will, he could do it again tomorrow. Or in a month. Or next year. Or never.

Professor Jason Furman was Chair of President Obama’s Council of Economic Advisors. As he put it, “Half measures and delays won’t work – there is way, way too much uncertainty that has been unleashed. The word of the President and his team won’t work – they are not credible. The only option to eliminate uncertainty would be for Congress to pass a law by veto-proof margins.”

But if Congress took that power away tomorrow, Trump could ask for its return. Congress might decide to play along. Or it might not.

And the institutional safeguards that, for decades, had prevented this kind of thing have proven themselves wholly inadequate. A future President responding to similar pressures and with similar opportunities might make similar choices.

The underlying regime is uncertain.

If companies knew that Trump’s tariffs would last forever, they could make decisions on that basis. If they knew that the horrors would end tomorrow and policy would be constrained to more normal bounds hereafter, they could make decisions on that basis instead.

But they cannot know either.

Instead, as in the 1930s, they will have very good reason to pull back. To wait and see. Billions of dollars are better held as dollars rather than bet on a game of Flux.

New Zealand’s policy uncertainty problems are far more minor in scale.

Consenting decisions on energy projects worth close to a billion dollars have become a crapshoot bet on which Commissioners you might get. Each punt at the process costs years and can cost tens of millions of dollars.

When even local companies cannot figure out what they must do to get through our system, good luck to potential investors less familiar with our peculiar regimes. But a new Resource Management system is coming.

A month ago, companies did not have to worry that the Minister of Finance would decide to announce a short process that could split their businesses into pieces. Minister Willis’s supermarket announcement introduced uncertainty that hadn’t previously really existed, raising concerns far beyond the supermarket sector.

And best of luck to anyone dealing with merger review in the current political environment. Some mergers should be rejected because they wind up causing harm to consumers. But when investment analysts like Forsyth Barr start emphasising political and public sentiment as much as the legal tests for merger clearance, as they did in their March 2025 report on Contact’s proposed acquisition of Manawa Energy, it is harder to describe the overall regime as stable and predictable.

But if anything, the past week has emphasised just how lucky we are in this country.

Other countries have responded to America’s tariffs with retaliatory tariffs that mainly hurt their own citizens. New Zealand has not.

Even better, New Zealand’s cross-party commitment to open trade and rules-based trading orders is solid. This weekend, Labour’s David Parker even suggested that New Zealand’s best response could involve inviting the European Union to join the CPTPP trade agreement. He is right.

The premium for having stable and predictable institutions – for regime certainty – will have gone up.

When the global regime has not been in this much flux in living memory, small islands of relative sanity have their advantages.

To read the full article on the Newsroom website, click here.