The Economic Policy Uncertainty (EPU) Index, developed by Baker, Bloom, and Davis, has reached record highs in recent years, reflecting increased global economic uncertainty. In January 2025, the index surged to 428.9, approaching levels seen during the COVID-19 pandemic1. This spike is largely attributed to President Trump's renewed tariff threats and escalating trade tensions23.

Key aspects of the EPU Index include:

• It measures uncertainty using newspaper coverage, federal tax code expirations, and economic forecast disagreements4.

• High EPU levels correlate with reduced business investment and economic growth56.

• The index has shown significant jumps during major events like the 2008 financial crisis and the 2016 Brexit vote4.

• Recent uncertainty is driven by unpredictable trade policies, with potential impacts on various sectors including automotive and agriculture12.

The elevated EPU levels suggest potential negative effects on the U.S. and global economies, with estimates indicating that persistent high uncertainty could reduce U.S. business investment by up to 14% over a four-year period5.

The impact of Trump's tariffs on U.S. manufacturing jobs appears to be negative, contrary to the administration's claims. Studies show that the tariffs have led to a net reduction in manufacturing employment:

• The Federal Reserve Board found that tariffs caused a 1.4% decrease in manufacturing jobs, with modest gains (0.3%) from protecting domestic producers outweighed by job losses due to higher production costs (-1.1%) and retaliatory tariffs (-0.7%)1.

• Economy-wide, Oxford Economics estimated the tariffs and resulting trade war cost 245,000 jobs and reduced real household incomes by $675 on average1.

• Rather than bringing back jobs, economists warn that higher U.S. labor costs may accelerate automation in factories relocated to avoid tariffs2. As one expert noted, "Operating costs are higher in the U.S., which creates a stronger economic incentive to automate even more functions."2

The burden of Trump's proposed tariffs is expected to fall heavily on American consumers, particularly low-income households. Studies project that tariffs could increase inflation and cost American consumers up to $2,400 per capita annually1. The impact would be regressive, with lower-income states in the South and Appalachia facing the greatest burden as tariffs disproportionately affect non-discretionary spending on necessities like clothing, food, and energy2.

• Tariffs could raise the price level by 2.7%, equivalent to an average household loss of $4,4003

• Annual losses for households at the bottom of the income distribution estimated at $1,9003

• Apparel prices projected to rise 58% in the short-term and remain 26% higher long-term3

• Consumer Price Index for washing machines rose 12% within months of 2018 tariffs1