Trade Policy Uncertainty and World Uncertainty

If measured world uncertainty shocks cause decelerating economic growth, then Trump will be partly responsible for the global slowdown the IMF is forecasting.

Economic policy uncertainty in the US, as measured by the Baker, Bloom and Davis has been elevated since the election, although not as much as one might think. But one component has been strikingly elevated: trade policy uncertainty.

Figure 1: Categorical economic policy uncertainty (blue) and trade policy uncertainty (red). NBER defined recession dates shaded gray; Trump administration shaded orange. Source: and NBER.

Consider the pattern of US trade policy uncertainty movements and world uncertainty.

Figure 2: Categorical  trade policy uncertainty (red) and world uncertainty. NBER defined recession dates shaded gray; Trump administration shaded orange. Source: and NBER.

US trade policy uncertainty Granger causes world uncertainty (i.e., can reject the null of non-precedence at the 10%). world uncertainty does not appear to Granger cause US trade policy uncertainty.

My guess is that with US retaliation in the Airbus dispute, worries about USMCA, and anxieties over the automobile Section 232, trade policy uncertainty is unlikely to drop substantially.

20 thoughts on “Trade Policy Uncertainty and World Uncertainty

  1. Moses Herzog

    My first inclination is just to ask “Has the world finally gone mad??”

    But in a less melodramatic query I guess I’ll ask the next thing that entered my mind. Does Orange Excrement plan on “helping” Boeing the same way he “helped” Harley Davidson?? The same way he “helped” Carrier workers?? The same way he “helped” coal mining jobs??

    If this orange bastard with the rodent on his forehead keeps “helping” industries we’re going to lose what little is left.

  2. Moses Herzog

    OK, posted. I was torn between asking her a question that appealed to her mathematical sensibilities and one more directly related to her new duties. And YOU KNOW Menzie I am totally capable of asking 5 Billion math related questions. It was relatively easy to post, and seems they have a similar filter process to here, but I kept everything “aboveboard” so we’ll see. No Roy Orbison Growl links. I even put in some of my “inner Stephen Moore” into my comment, which in her case isn’t very hard for me, so we’ll see……

    1. PeakTrader

      Robert Lighthizer, the US trade representative, said: “The time has come for action” (to settle these long standing trade disputes rather than kick the can down the road).

      And, in the historically slow Q1, GDPNOW is currently 2.3%.

      The yield curve is no longer inverted. Perhaps, the Fed will need to slow or stop the run-off of bonds from its balance sheet or cut rates later this year to achieve a soft-landing, which Trump, Moore, and Cain would go for. The Fed has already shifted course, thanks, in part, to Trump.

      You can praise the Trump Administration later.

      1. pgl

        Moore and Cain? We have finally found two clowns that are almost as dumb as Trump’s little cheerleader here. Have fun in the sand box with your good buddies!

    2. pgl

      Oh Lord – Peaky reads a headline and goes off the rails proving what we already know – Peaky is STUPID. Hey Peaky – read further:

      “The timing of Bank of America’s announcement is no coincidence. Moynihan and the CEOs of JPMorgan Chase, Citigroup, Goldman Sachs and three other banks will appear in front of a House finance committee Wednesday in the most significant hearing on the banking industry since Democrats took control of the House earlier this year.”

      Fear of the wrath of the Democrats led to this timing – not that tax cut for the rich. Sure bank shareholders are ripping off the US Treasury but if you think $20 an hour is great pay for anyone working on Wall Street – you need to get yourself out of your mom’s basement and face the real world.

      1. PeakTrader

        Pgl, you don’t know if banks postponed the wage hike till just before the hearing.

        Banks were already paying $15 to $18 an hour minimum wage.

        Not bad for someone, who can only have a high school diploma or GED.

        And, through hard work and on the job training, someone can be a bank manager, making much more than $20 an hour minimum wage.

        You have no idea how businesses operate – pathetic.

        1. pgl

          “Banks were already paying $15 to $18”.
          So getting $20 an hour is not exactly a yuuuge pay increase. Peaky in his incessant stupidity just made my point. Babble on!

        2. pgl

          One would think that even a failed banking would know how to read the financials for Bank of America but it seems PeakLazy cannot do so. Permit me. B of A’s pretax income rose from $29.2 billion in 2017 to $34.6 billion in 2018 but its income tax fell from $11 billion in 2017 to only $6.4 billion. OK math quiz – can any help PeakStupidity figure out after-tax income? Since this is beyond his math abilities, I’ll shall. After-tax income rose from $18.2 billion to $28.2 billion – an increase exceeding 50%!

          Now PeakDishonesty is trying to tell us a mere 10% increase in nominal wages vindicates all the supply-side silliness we heard from Team Trump. I would say it does not get dumber than this – but PeakIdiot will find a way!

          1. PeakTrader

            Pgl, your response to how businesses operate proves you’re pathetic.

            Let me know when you learn multiplication.

  3. pgl

    “Trump will be partly responsible for the global slowdown”.

    You know his base will likely praise Trump if China’s economy suffers. After all – it is not about what is good for the average American. It is all about hatred for non-whites with this crew.

  4. Zi Zi

    Obama rightly wanted to be the “world”‘s do-good president — when he was visiting China, the warm hosts would only let him come out from the tail of the plane.

    1. Moses Herzog

      So many comments I want to make here, but I’m not gonna do it. It is so sweet though, how Xi Jinping and Beijing treat their own citizens.

      My personal experience with mainland Chinese is they go overboard to be kind, gracious, and generous with their guests (even sometimes compassionate towards those who, underneath the surface, they even dislike). Which makes it all the more odd Xi Jinping would act like a rude clod and an oaf to the leader of the most powerful nation in the world. Now, it’s commonly known how Han people of China feel to Xinjiang and Tibet people and it’s commonly known how Han people socially treat Xinjiang and Tibet people. So commonly known there’s no point in me saying it. But why would Han people be rude to other Han people?? Maybe you can think about that last question for awhile and turn it over in your mind some late night.

  5. joseph

    Moses Herzog never fails to be offensively misogynistic at any opportunity.

    Someone has to say it because silence is acquiescence.

    1. Moses Herzog

      I’m glad you’re an expert about gender issues and gender relations, because you sure as shit don’t know much about economics. Or similar to Barkley Junior and his non-existant “skewed” distribution that he lied about was in the paper he cited, is the fact I pointed that out what really bothers you about me??

      It’s fascinating some people on this site want to ignore Joe Biden’s molesting type behavior, and ignore Elizabeth Warren falsely claiming minority status for the ethnic group she falsely assumed would tolerate that crap, But when I type exactly how I stand on things (a lot of it obviously geared towards humor) you feign how offended you are. I tell you what, the same day I become a faculty member at a University named for a slave-owner, or the very same day I walk up behind a woman who barely knows me, latch onto her shoulders and sniff her hair for 5 minutes—-I’ll be sure to apologize to you and Barkley Junior about how I do or say things. That very same day I do that I promise I will apologize to you and Barkley Junior. Because there’s nothing more treasured in this nation called America, than someone saying they’re “Sorry” after they get caught or called out.

      1. Barkley Rosser

        OK, I am sort of mystified as to what is going on here, aside from Moses getting all bent out and making a fool of himself yet again by yet again bringing up skewed distributions.

        You put up a post about Trump’s failures to keep employment up in various companies as he promised, which looked just fine, Moses. Then the next post you make mysterious and vague comments about an unnamed “her” and how you were/are asking her mathematical questions. Did you put up a post that has since been deleted? This one seems to have nothing to do with the first pretty reasonable one, although as it stands very mysterious, although appearing to be vaguely critical of the mathematical ability of this unnamed “her.”

        Then joseph pops up accusing you oa being “misogynist” while not saying specifically why he is saying that, although you certainly have been on numerous occasions here, Mose. Were you motivated by Mose’s weirdly vague comments about the possible lack of math ability of this apparently anonymous “her” when you made your comments, joseph? Or was there another post that has since disappeared where Mose got more specific and more misogynist?

        Of course in ranting against me, Moses also somehow goes back to his long ago rants against Elizabeth Warren. I thought you had decided to lay off her on this Indian business since she publicly apologized, Mose. Guess that was not enough for you.

        Anyway, this seems a bit mysterious to me, but joseph, if the only posts that are here now are all that have been, did you really need to go poke at Mose because he put up some completely incoherent weirdness about an anonymous her, which has set him off into dragging up a bunch of old stuff where gets insulting but mostly makes himself look like a lying moron?

        1. pgl

          Now remember – Janet Yellin is only 5′ 3″ so she knows nothing about monetary economics whereas Milton Friedman standing at 5′ 0″ inches got a Nobel Prize!

          Yes – we are required to required to endure this sexist garbage as it is Trump’s World!

  6. joseph

    Yes, Barkley, it seems the offending post was removed by the moderators, so needn’t go farther. Something the moderators don’t do lightly. And deletion was deserved it if there is any interest in making this blog welcoming to everyone.

    Moses, like Biden, just won’t ever get it and both should retire into the sunset before further sullying of their reputations.

  7. Barkley Rosser

    Thanks for clarifying that, joseph.


    Maybe the mysterious “her” that Mose went after so badly he got deleted was Yellen? If he went after her, he has really seriously lost his mind. It was bad enough when he was declaring Pelosi to be senile, but Yellen was documened to have the best forecasting record of anybody at the Fed at any level, which means that she is really super seriously smart. And as for her her math ability, well, while still a senior in high school in Brooklyn she was visiting Columbia to take a course in nonlinear differential equations. So, I certainly hope that Mose was not silly enough to criticize her math abillity. That certainly would have deserved deletion.

  8. Erik Poole

    Interesting application of Granger causality.

    Expect more uncertainty from Canada where the next federal election will be held this coming October. The current government has threatened to not ratify NAFTA II if the tariffs on steel and aluminum which the USA keeps in place for ‘security reasons’ remain in place.

    The current Trudeau Liberal government has made a number of mistakes recently. In particular, it placed Huawei CFO Meng Wanzhou under house arrest in Vancouver at the request of the USA because of alleged violation of sanctions on Iran. Put in graphic political terms, it means that prime minister Justin Trudeau “bent over” for the big man in the room with the gorgeous man-breasts and shapely hips: President Trump.

    Now the opposition Conservative Party are big backers of the Israeli ethnic-cleansing nation-building project. Which I do not believe is as popular in Canada as it is in the USA given how Americans are socialized from an early age to glorify ethnic cleansing.

    All this to say, expect plenty of kick-back (non-violent blow back) from the current federal Liberal government. Giving into Trump would be political suicide. All this supports more economic policy uncertainty.

    With luck, the uncertainty and mediocre economic outcomes in the USA will devastate Trump in the next presidential elections even if radical, violence-prone leftists around the world are praying feverishly for Trump’s re-election.

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