Washington Weekly: Tariffs, Tensions and the New ‘Business as Usual’

Springtime in Washington, D.C. Cherry blossoms color the presidential monuments. Outdoor cafés in Georgetown are bustling. It’s a time when the talk of the town turns to … baby strollers.

That’s right. Baby strollers. Ninety-seven percent of them are made in China and they played a central role in the weekly conversation between QED Investors partner Amias Gerety and PYMNTS CEO Karen Webster. Because even as the business world tries to define “business as usual” amid a brief lull in tariff threats, replaced now by negotiations, that definition is hard to come by. And baby strollers? Gerety used the example of a thriving small business in Washington that sells strollers and other baby gear to illustrate the current state of the uncertain economy.

“It’s called Three Littles,” Gerety told Webster. “And [the owner] is tearing her hair out, because she’s got great customers and a great business in a great neighborhood, and she’s thriving, and yet she can see what’s coming.”

As Gerety pointed out, the owner of Three Littles has a minimal stockpiling budget to get product in before the tariffs against China — whatever they settle at — become consistent and permanent. Gerety compared “what’s coming” to a tidal wave.

And as Gerety and Webster discussed, that fear of the future is defining business as usual. The Three Littles scenario is being played out in boardrooms and back offices all over the world as “business as usual” meets the inconsistency and potential negative economic consequences of trade policy and cross-border finance. In fact, Gerety came to this week’s conversation fresh off having a funding term sheet pulled from one of his clients at QED. He was disappointed but not surprised.

“Business as usual means today, try to stay on the narrow path, but don’t do anything too aggressive,” Gerety said. “Separately, I talked to a private equity firm recently and they said a month ago, their pipeline was as busy as it had ever been, and now it’s dead. And I said, is that because you pulled back or because the companies are pulled back? He said it’s both because now you need to underwrite a major recession immediately. And that means that the companies no longer want to raise money from if we’re underwriting a big haircut to their projections.”

Not that the conversation was all doom and gloom. Gerety — a former assistant secretary of the treasury in the Obama administration — pointed to software providers riding the GenAI wave, where customers “feel their own customers reacting so positively to new AI experiences” that investment plans remain intact. He mentioned one portfolio company has kept its 24/7 customer-success staff flat at 10 people while growing from 10 clients to 1,000, thanks to artificial intelligence (AI) tools that automate routine queries. Such gains in efficiency, he argued, could allow high-margin digital businesses — and some domestic service sectors less dependent on imported inputs — to absorb higher costs better than manufacturers tied to global supply chains.

Capital, however, is no longer abundant. Early-stage companies that “just need to keep growing” are pressing ahead, but firms seeking $20 million to $50 million rounds suddenly confront a yawning gap in available funds. Layoffs in the venture ecosystem have been limited so far, Gerety noted, yet he doubts that will last if tariff uncertainty drags on through the summer.

Behind the cost-cutting lies a second-order problem: companies can trim travel budgets overnight, but re-engineering supply chains takes quarters. Importers that once diversified between China and Southeast Asia now find that shipping lanes, container space and labor contracts are all priced with the tariffs in mind, raising switching costs just as financing dries up. “If the tariffs come down before I have to make the order, maybe I’ll be able to rush the order,” Gerety said. “But what do we call that? That is a supply-chain disruption.” For firms dependent on seasonal goods, the calendar leaves little cushion.

That’s the outlook for venture capital. The outlook for consumer spending depends in part on having affordable goods to stock shelves, a prospect that has already drawn some warnings from retail analysts. Retailers must soon lock in merchandise for the critical back-to-school season, but still have no visibility on whether the administration will modify or roll back the duties now rippling through supply chains. Many CEOs, Gerety said, harbor “some hope that this whole thing is just a bad dream” and are stalling purchases in the belief that a negotiated reprieve might come in the next 90 days. The gambit carries risk: delaying orders could recreate the very supply-chain bottlenecks that fueled inflation after the pandemic. “We’re collectively holding our breath,” he said.

Some executives are looking to the courts or Congress for clarity, noting lawsuits that argue the president has exceeded his emergency powers. History offers little comfort, Gerety contended: courts have been reluctant to second-guess presidents on what constitutes an economic emergency, and a partisan legislature shows little appetite to reclaim tariff authority. That leaves business planners with the prospect of policies that can change by tweet. As one private-equity partner told him, the industry is learning to “price in presidential volatility” the way it once modeled commodity swings.

For now, Gerety advises management teams to execute on core plans while assuming consumer demand — 70% of U.S. GDP — will soften as prices climb. The mantra in every boardroom, he said, is “control what we control, execute, tune out the noise,” yet the noise is growing louder. If clarity on trade policy fails to materialize, the calculus could flip from cautious restraint to decisive cost-cutting — an outcome that would redefine “business as usual” for companies and their financiers alike.

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