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Markets in Motion

Markets Remain on Trade Watch as New Tariffs LoomMarketsRemainonTradeWatchasNewTariffsLoom

Mar 26, 2025

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US Economic Policy Uncertainty Index

Source: Bloomberg. Data from Jan 01, 2015 – Feb 28, 2025. The categorical data include news-based sub-indexes that require different terms sets. For example, the trade policy category contains terms like import tariffs, government subsidies, and trade treaties. The fiscal policy category contains terms like government spending, federal budget, and fiscal stimulus. The monetary policy category contains terms like federal reserve, money supply, and interest rates. For the complete terms sets and more details on methodology, see https://www.policyuncertainty.com/categorical_epu.html. Each categorical series is normalized to have a mean of 100 from 1985-2010. The long-term averages are calculated using Jan 1985 - Feb 2025 data (EPU 107, Monetary Policy Uncertainty 97, Fiscal Policy Uncertainty 110, Trade Policy Uncertainty 136). The grey bar denotes the recession dated by NBER.

Markets spent another week on trade watch, as investors parsed the latest clues on President Donald Trump’s plans to roll out a series of new tariffs. Trump, who is expected to detail his reciprocal tariffs on April 2, suggested that he could refrain from enacting levies that fully match those imposed by US trade partners, saying he “may give a lot of countries breaks.” While separate tariffs on select sectors like autos and semiconductors are also in the pipeline, the possibility that Trump’s reciprocal tariffs may not be as sweeping as feared rallied stocks to begin the week, helping major indexes recoup some of their losses since the start of the year.

The US Economic Policy Uncertainty (EPU) Index, which tracks media coverage, the expiration of federal tax provisions, and the gap between economic forecasters’ predictions, has climbed beyond its pre-pandemic levels with the outcome of the trade spat still to be determined. This uncertainty over the investment outlook, including potential impacts to inflation, economic growth and policy rates, has contributed to spikes in market volatility of late. PGIM Quantitative Solutions’ Market Matters blog examines how investors can track the dynamics of policy uncertainty to help build portfolios that could withstand shocks while capturing alpha opportunities.

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