Economic Impact of Trade Policy Uncertainty

This report discusses the economic implications of trade policy uncertainty in the context of the upcoming U.S. presidential election. It highlights the potential consequences of a second Trump presidency, particularly regarding trade policy and its effects on U.S. and Canadian GDP. The report utilizes a trade policy market volatility index to measure the economic effects of uncertainty stemming from trade-related issues. It notes that trade-related uncertainty significantly increased during Trump's first term and could lead to a projected loss of U.S. GDP by one percentage point by the end of his second term if uncertainty remains elevated. The report also outlines how this uncertainty impacts investment and economic activity, emphasizing that the projected loss of output is distinct from the broader economic effects of potential policy measures such as tariffs. The findings are based on empirical estimates from the Scotiabank Global Macroeconomic Model, which assesses the implications of trade policy uncertainty on economic performance.