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Why? Q2 tools funding as implied by GDPNow of 5/30.
Figure 1: Caldara et al. Trade Policy Uncertainty index (blue, left scale), and nonresidential tools funding (black, proper log scale), and implied by GDPNow of 5/30 (grey sq.), each in bn.Ch.2017$ SAAR. Source: Iacoviello TPU, BEA 2025Q1 second launch, and Atlanta Fed.
Note the spike in commerce coverage uncertainty (every day knowledge proven right here). The accompanying deceleration in tools funding is in line with the findings in Caldara, Iacoviello, Molligo, Prestipino, and Raffo “The Economic Effects of Trade Policy Uncertainty,” Journal of Monetary Economics (2020).
How does the Caldara et al. measure examine towards the purely information primarily based model of Baker, Bloom and Davis (the specific element of EPU)? Here’s a graph of standardized (2015-2025M05) indices:
Figure 2: TPUD (mild blue), and EPU-trade (crimson), each standardized over 2015M01-2025M05 interval. NBER outlined peak-to-trough recession dates shaded grey. Light orange denotes second Trump administration. Source: Iacoviello TPU, policyuncertainty.com, NBER, and writer’s calculations.
Both sequence have proven comparable will increase for the reason that election.
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