We study the effects of unexpected changes in trade policy uncertainty (TPU) on the U.S. economy. We construct three measures of TPU based on newspaper coverage, firms’ earnings conference calls, and aggregate data on tariff rates. We document that increases in TPU reduce investment and activity using both firm-level and aggregate macroeconomic data. We interpret the empirical results through the lens of a two-country general equilibrium model with nominal rigidities and firms’ export participation decisions. In the model as in the data, news and increased uncertainty about higher future tariffs reduce investment and activity.
And here’s one set of IRF’s:
Something to keep in mind when considering the evolution of their news-based trade policy uncertainty index: