Why trade uncertainty isn’t the real problem
Everyone’s watching the trade talks. I’m watching something more dangerous.
Across Canada, I’m seeing companies freeze. Investment in people – paused. Investment in systems – delayed. Investment in the capabilities that build resilience – shelved until “things stabilize.” The rationale is always the same: we need to protect margins, preserve cash, and wait for clarity.
I understand the instinct. Trade uncertainty is real. But here’s what concerns me: the response to external uncertainty is creating an internal crisis that will outlast whatever happens with tariffs or trade deals.
You’re not in a financial recession. You’re in a capability recession. And unlike financial recessions that happen to you, this one is self-inflicted.
What a Capability Recession Looks Like
It starts quietly. A leadership program gets postponed. A technology upgrade is pushed to the next quarter. A strategic hire is frozen. One decision at a time, companies stop investing in what makes them capable of executing when conditions change, sometimes abruptly.
The logic feels sound: reduce discretionary spending, focus on core operations, ride out the uncertainty. But here’s the part most leaders miss – organizational and individual capabilities don’t sit idle. They either build or atrophy. There’s no neutral ground.
While you’re waiting for certainty to return before investing, your people are becoming less equipped to handle complexity. Your business systems and technology are falling further behind what the market will demand. Your organizational muscles – the ability to think strategically, execute collaboratively, and adapt quickly – are weakening.
And the gap between what your organization can deliver and what the environment will eventually require is growing.
The AI Exception (That Proves the Rule)
There’s one notable exception to the investment freeze: AI.
Companies that have postponed leadership development, delayed system upgrades, and frozen strategic hires are writing checks for AI implementation. The message this sends is hard to miss: we’ll invest in technology, but not in people.
And it’s raising anxiety levels inside organizations in ways most leaders don’t fully recognize.
Employees watch AI budgets get approved while their training requests get denied. They hear about automation while capability-building gets shelved. The implicit message – whether intended or not – is that the company is investing in what might replace them, not in what would develop them.
But here’s the deeper problem: AI without organizational capability to use it well is just expensive technology sitting on top of broken processes and anxious people.
Is AI really going to be the definitive competitive advantage? Or is the advantage going to go to companies that built the capability to integrate AI into how people actually think, collaborate, and make decisions?
Because right now, most companies are betting on the technology itself being the differentiator. They’re investing in AI while delaying the IT infrastructure that would support it, skipping the change management that would help people adopt it, and avoiding the leadership development that would help managers guide teams through it.
That’s not strategy. That’s magical thinking.
The competitive advantage won’t come from having AI. It will come from having the organizational capability to use it in ways that strengthen how people work, not just in ways that reduce headcount. And building that capability requires investing in people, systems, and leadership – the very things that are being cut.
So, you end up with a strange inversion: the one investment companies are making is actually increasing internal anxiety and capability gaps, while the investments that would build genuine resilience are being postponed.
I’ve Seen This Movie Before
After the 1987 crash. After the 1990-1991 recession. The Dot.com bust in 2000. The 2008 financial crisis. The pattern is always the same.
Companies that waited for stability before investing in capability emerged weaker. They survived the crisis, but they weren’t positioned for what came next. When growth returned, they didn’t have the people, systems, or organizational capacity to capitalize on it. They spent the recovery playing catch-up.
But the companies that used uncertainty to build capability – to invest in leadership, to strengthen internal systems, to develop their people – emerged stronger. They didn’t spend recklessly. They invested strategically in what would matter most when the environment shifted again.
Because here’s the truth: the external environment eventually stabilizes. Trade deals get signed or they don’t. New equilibria form. But your capability gaps don’t heal on their own.
The Cost of Waiting
Here’s what makes this capability recession particularly dangerous: it’s setting companies up for the very transformation failures they’re trying to avoid.
We know that roughly 76% of transformation efforts fail to deliver meaningful outcomes. Why? Because when a crisis eventually forces change, companies rush into transformation without the internal capability to execute it.
They wait until competitive pressure or market shifts make change unavoidable. I have seen this again and again. They launch initiatives their culture can’t absorb, demand collaboration from teams that haven’t learned to work across boundaries, expect strategic thinking from leaders who’ve been rewarded for firefighting, and try to scale using infrastructure that was never designed for it.
The failure isn’t in the strategy.
It’s in the capability gaps – in people, processes and in organizational systems – that were allowed to grow while leadership waited for certainty.
Right now, in the name of prudence, companies are guaranteeing they’ll be part of that 76%. They’re depleting the very capabilities they’ll need when large scale change becomes non-negotiable. And change always becomes non-negotiable – it’s just a question of whether you’ll be ready when it does.
What Leadership Requires Right Now
This isn’t about spending recklessly. It’s about recognizing that capability is an asset, not an expense.
When you invest in developing your leaders’ capacity to think across strategy, change, and risk, that capability doesn’t expire when the trade situation resolves. When you strengthen your organization’s ability to collaborate under pressure, that serves you regardless of what happens externally. When you build systems that allow people to make decisions with clarity rather than anxiety, that resilience compounds over time.
The companies that will emerge stronger aren’t the ones predicting the future correctly. They’re the ones building the capability to respond effectively, no matter what happens.
That requires a different kind of vision from leadership. Not a vision that says “here’s exactly where we’ll be in three years” – because no one knows. But a vision that says, “here’s who we need to become” and “here are the capabilities we must build to get there.”
It requires a mission that engages people around what you’re building together, not just what you’re preserving. Because people don’t bring their best thinking to preservation mode. They bring it when they believe they’re part of something that’s being intentionally strengthened.
The Choice
You can protect margins today and guarantee weakness tomorrow. That’s a choice – and it’s the choice most companies are making right now.
Or you can accept that uncertainty is the condition, not the exception, and ask a different question:
What capabilities do we need to build now so that when conditions shift – and they will shift – we’re positioned to move decisively?
Your investors aren’t served by short-term preservation that guarantees long-term weakness. Your stakeholders aren’t served by balance sheets that look safe today but reveal vulnerabilities and capability gaps tomorrow. Your employees aren’t served by leadership that reacts to external uncertainty by creating internal stagnation.
They’re all served by leadership that sees capabilities as the assets that deliver returns in good time.
What This Means
Trade uncertainty will be resolved one way or another. New equilibria will form. What won’t resolve on its own is the capability recession happening inside organizations right now.
The question isn’t whether you can afford to invest in capabilities during uncertainty. The question is whether you can afford not to.
Because the companies that treated this moment as a reason to build rather than a reason to wait – they’re the ones who’ll be ready when everyone else is scrambling to catch up.
