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According to a study released this week by the Federal Reserve, the uncertainties in trade policy driven by the Trump administration's escalating dispute with China mean that by the beginning of next year, the United States will lose hundreds of billions of dollars in output and as much as $850 billion worldwide.
Fed researchers analyzed newspaper articles and corporate earnings conference calls to estimate trade policy uncertainty. They found that trade policy uncertainty had recently "soared to its highest level since the 1970s".
Other economists, especially Stanford professor Nicholas Bloom and his colleagues, also mentioned similar increases in uncertainty in the paper.
Researchers at the Federal Reserve then estimated the impact of this uncertainty on economic activity as firms reduced investment and production. They concluded that, globally and in the United States, the impact was about 1% of GDP.
According to Reuters calculations, the gross domestic product (GDP) of the United States is about $20 trillion, and the global GDP is about $85 trillion. Trade uncertainty has a drag on the GDP of the United States and the global GDP of about $200 billion and $850 billion, respectively.
Researchers say these estimates are uncertain.
But it is worth noting that they were among the first researchers to quantify the tremendous impact of President Trump's approach to trade agreements. Trump said trade agreements put the U.S. economy at a global disadvantage.
In order to achieve better terms of trade, the Trump government raised tariffs on hundreds of billions of dollars of Chinese imports and imposed or threatened to impose tariffs on other trading partners, including Mexico and the European Union. China and other countries, in turn, threaten or have imposed tariffs on American goods.


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