How Wisconsin Businesses Can Prepare for Economic Uncertainty

Four months into 2025, the economic landscape is in flux, with the optimism from late last year giving way to heightened concerns over policy shifts, trade disruptions, and labor shortages.

Wisconsin, a state heavily dependent on manufacturing, agriculture, and exports, finds itself at a crossroads. Understanding these trends is important for businesses, policymakers, and individuals striving to make informed decisions.

One of the leading experts in community economic development, Dr. Steven Deller, has provided key insights into the current and near-term economic outlook. Dr. Deller is a Vilas Distinguished Achievement Professor at the University of Wisconsin–Madison and a Community Economic Development Specialist in the UW-Madison Division of Extension.

His extensive research focuses on regional economic development, labor markets, rural economies, and public policy. His work has explored topics such as the economic impact of mining, manufacturing location decisions, and the effects of taxes and public services on economic growth. He has also co-authored books, including Community Economics: Linking Theory and Practices and The Fiscal Health of U.S. Cities.

2025 Economic Trends and Challenges

At the close of 2024, major financial institutions like Goldman Sachs and organizations such as the OECD had projected steady economic growth in 2025, driven by robust consumer activity and labor market stability. However, several key developments have shifted the economic outlook, introducing greater uncertainty and potential volatility.

1. The Impact of Trade and Tariffs

One of the most significant concerns is the escalation of tariffs and trade disputes. For Wisconsin, whose top trading partners are Canada, Mexico, and China, higher tariffs could negatively affect exports and disrupt manufacturing supply chains. Wisconsin exported approximately $27.5 billion worth of goods in 2024, making up 6% of the state’s Gross Domestic Product (GDP.)

Many manufacturers rely on raw materials and components from Canada and Mexico, and retaliatory tariffs from these countries could drive up costs and reduce profitability in sectors like automotive manufacturing, machinery, and food processing.

2. Labor Market Pressures and Immigration Policy

Wisconsin has faced an ongoing labor shortage for years, particularly in industries such as dairy farming, construction, and food processing. The state’s unemployment rate has remained below the national average, hovering around 3% in early 2025. However, new immigration policies, including mass deportations, could exacerbate labor shortages by removing a vital workforce segment.

Dr. Deller’s analysis suggests that if Wisconsin were to lose just 5,000 undocumented dairy workers, the ripple effect could lead to 14,000 total job losses and a 29% decline in dairy-related economic activity. Other sectors, including hospitality, healthcare, and manufacturing, could also be severely impacted by workforce reductions, leading to higher operating costs, slower production, and potential business closures.

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3. Economic Uncertainty and Business Confidence

As trade policies, tariffs, and immigration laws continue to shift unpredictably, businesses are struggling to make long-term investment decisions. Even the Federal Reserve has signaled hesitation in adjusting interest rates, with Chairman Jerome Powell stating that uncertainty over policy direction has led to a “wait-and-see” approach.

Historically, uncertainty itself can depress investment and hiring, as businesses delay decisions until they have greater clarity. A similar situation unfolded during the Great Recession and early COVID-19 recovery, where business owners pulled back on expansion plans, leading to slower economic growth. A prolonged period of unpredictability could lead to a downturn, particularly if consumer confidence weakens.

4. Consumer Spending and Economic Growth

The U.S. economy is heavily driven by consumer spending, which accounts for approximately 70% of GDP. As of early 2025, consumer spending trends remained strong but volatile, reflecting both wage growth and inflation concerns.

In recent months, inflation expectations have risen, particularly in areas like food, energy, and housing. Higher prices, combined with uncertainty about future job stability, could lead to reduced discretionary spending. Additionally, higher tariffs on imported goods could further increase costs for consumers, affecting industries such as retail, automotive sales, and construction.

What This Means for Wisconsin Businesses

Given these economic trends, Wisconsin businesses must adopt proactive strategies to navigate potential challenges:

• Strengthen Financial Planning: Companies should closely monitor cash flow, identify areas to reduce unnecessary expenses, and prepare for potential downturns.
• Diversify Supply Chains: With tariffs affecting imported materials and goods, businesses should seek alternative suppliers and domestic sourcing options.
• Adapt Workforce Strategies: Given the labor shortage, employers may need to focus on employee retention, automation, and alternative hiring solutions to maintain operations.
• Monitor Consumer Trends: Understanding shifts in consumer behavior—particularly in response to inflation and employment concerns—can help businesses adjust their marketing and product offerings accordingly.

Preparing for a Shifting Economic Landscape

Rapid policy shifts and global trade uncertainty have introduced new risks. While some industries may see continued growth, others face significant headwinds due to tariffs, labor shortages, and policy instability.

Evolving challenges require businesses to be more adaptable than ever. By staying vigilant, planning for potential disruptions, and leveraging professional resources, business owners can navigate uncertainty and emerge stronger.

For business owners looking for additional insights and guidance, economic forecasting, financial consulting, and strategic planning services are helpful tools for staying ahead in an evolving market.