Trump causes trade uncertainty to skyrocket

On Monday, January 29, Donald Trump was sworn in as 47th US president and at this occasion we look at the Trade Policy Uncertainty index today (TPU). Although there was no immediate announcement on tariffs on all trade partners (at this point there is a plan to impose 25% tariffs on Canada and Mexico), the uncertainty how the global trade will look like is very high. Actually, TPU has skyrocketed most recently. The TPU index is based on automated text searches of the electronic archives of seven newspapers: Boston Globe, Chicago Tribune, Guardian, Los Angeles Times, New York Times, Wall Street Journal, and Washington Post. The measure is calculated by counting the monthly frequency of articles discussing trade policy uncertainty (as a share of the total number of news articles) for each newspaper. The index is then normalized to a value of 100 for a one percent article share. The paper authored by Caldara, Dario, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino, and Andrea Raffo documents that increases in TPU reduce investment and activity using both firm-level and aggregate data.