Recent analysis from the IMF cites increasing uncertainty caused by trade tensions as a primary driver of sluggish global growth, a trend which moved the IMF to issue a downward revision to its global GDP growth forecast in the July edition of the World Economic Outlook. According to IMF estimates, the escalation of trade uncertainty observed this year could consume around 0.75 percentage points of global growth in 2019.
To track trade tensions globally, the IMF and Stanford University teamed up to develop the World Trade Uncertainty Index (WTU).* This index measures trade uncertainty in 143 countries based on the frequency with which the word "uncertainty" is mentioned in country reports produced by the Economist Intelligence Unit. And today the index sends a clear message as it continues to hit new 20-year records: uncertainty has taken hold.
Trade uncertainty merits monitoring globally. The US-China bilateral dynamic, while certainly influencing recent Index scores, is not solely driving the overall index or the risk to global economic growth referenced by the IMF.
*The WTU index methodology is similar to the well-known Global Economic Policy Uncertainty Index (EPU), however, the EPU uses a broad set of newspapers to monitor the use of the term uncertainty.
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