Tag: World Trade Uncertainty Index

In a blog in October 2024, we looked at global uncertainty and how it can be captured in a World Uncertainty Index. The blog stated that ‘We continue to live through incredibly turbulent times. In the past decade or so we have experienced a global financial crisis, a global health emergency, seen the UK’s departure from the European Union, and witnessed increasing levels of geopolitical tension and conflict’.

Since then, Donald Trump has been elected for a second term and has introduced sweeping tariffs. What is more, the tariffs announced on so-called ‘Liberation Day‘ have not remained fixed, but have fluctuated with negotiations and threatened retaliation. The resulting uncertainty makes it very hard for businesses to plan and many have been unwilling to commit to investment decisions. The uncertainty has been compounded by geopolitical events, such as the continuing war in Ukraine, the war in Gaza and the June 13 Israeli attack on Iran.

The World Uncertainty Index (WUI) tracks uncertainty around the world by applying a form of text mining known as ‘term frequency’ to the country reports produced by the Economist Intelligence Unit (EIU). The words searched for are ‘uncertain’, ‘uncertainty’ and ‘uncertainties’ and the number of times they occur as percentage of the total words is recorded. To produce the WUI this figure is then multiplied by 1m. A higher WUI number indicates a greater level of uncertainty.

The monthly global average WUI is shown in Chart 1 (click here for a PowerPoint). It is based on 71 countries. Since 2008 the WUI has averaged a little over 23 000: i.e. 2.3 per cent of the text in EIU reports contains the word ‘uncertainty’ or a close variant. In May 2025, it was almost 79 000 – the highest since the index was first complied in 2008. The previous highest was in March 2020, at the start of the COVID-19 outbreak, when the index rose to just over 56 000.

The second chart shows the World Trade Uncertainty Index (WTUI), published on the same site as the WUI (click here for a PowerPoint). The method adopted in its construction therefore mirrors that for the WUI but counts the number of times in EIU country reports ‘uncertainty’ is mentioned within proximity to a word related to trade, such as ‘protectionism’, ‘NAFTA’, ‘tariff’, ‘trade’, ‘UNCTAD’ or ‘WTO.’

The chart shows that in May 2025, the WTUI had risen to just over 23 000 – the second highest since December 2019, when President Trump imposed a new round of tariffs on Chinese imports and announced that he would restore steel tariffs on Brazil and Argentina. Since 2008, the WTUI has averaged just 2228.

It remains to be seen whether more stability in trade relations and geopolitics will allow WUI and WUTI to decline once more, or whether greater instability will simply lead to greater uncertainty, with damaging consequences for investment and also for consumption and employment.

Articles

• IMF World Economic Outlook: economic uncertainty is now higher than it ever was during COVID

The Conversation, Sergi Basco (23/4/25)

• Economic uncertainty hits new high

McKinsey, Sven Smit et al. (29/5/25)

• Trade tensions and rising uncertainty drag global economy towards recession

UNCTAD News (25/4/25)

• IMF Warns Global Economic Uncertainty Surpasses Pandemic Levels

The Global Treasurer (24/4/25)

• Britons ‘hoarding cash amid economic uncertainty and fear of outages’

The Guardian, Phillip Inman (10/6/25)

• America’s Brexit Phase

Foreign Affairs, Jonathan Haskel and Matthew J. Slaughter (10/6/25)

• Goldman Sachs’ CEO on the ‘Big, Beautiful Bill,’ Trump’s Tariffs and Economic Volatility

Politico, Sam Sutton (13/6/25)

• The Countries Where Economic Uncertainty Is Rising Fastest

24/7 Wall St., Evan Comen (9/6/25)

Uncertainty Indices

• World Uncertainty Index

World Uncertainty Index, Hites Ahir, Nick Bloom and Davide Furceri

• Economic Policy Uncertainty Index

Economic policy Uncertainty, Scott R. Baker, Nick Bloom and Steven J. Davis

Questions