ECB: In what ways does uncertainty in trade policy influence economic activity within the euro area?

Significant Increase in Trade Policy Uncertainty

In recent years, uncertainty surrounding trade policy has grown dramatically, reaching unprecedented levels over the past year. The initial surge occurred during the 2018-2019 US-China trade tensions under the first Trump administration, and uncertainty intensified once more around the 2024 US presidential election and the onset of the second Trump term, as trade policy became a central focus of US economic strategy. Early 2025 saw a wave of new tariff measures, representing a substantial policy change that drove trade policy uncertainty to new highs, surpassing those observed during the earlier trade conflict (see Chart A). Although there was a slight reduction in uncertainty thereafter, it remained elevated.