IMF: World Trade Uncertainty Hits Highest Level in 2019

Increasing trade uncertainty is seen as a driving factor in the slowdown in economic growth around the world, amid a growing trade war between the world's two biggest economies.

This description is part of the current edition of the IMF's Global Economic Prospects report, which describes the state of the global economy.

According to a new IMF index "World Trade Uncertainty" (WTU), global skepticism is observing a hike not only in the US and China, where trade tensions are highest but, also in many other countries.

The Index has followed 143 countries since 1996 for a wide range of developed and developing economies.

Trade-based indicators of uncertainty focus either on the US (economic policy uncertainty index of Scott Baker, Nicholas Bloom, and Stephen Davis) or on the global economy as a whole (BlackRock Index) or on a group of 44 countries' indicators.

The new index is based on the Economist Research Unit and follows a standard structure that helps alleviate concerns about accuracy, ideological bias, and compliance.

The WTU index counts the number of times uncertainty was mentioned within a word related to trade in Economist Intelligence Unit (EIU) country reports.

To calculate the new index, the IMF counts how often the word "uncertainty" appears in the EIU reports near terms such as protectionism, tariffs, and trade.

The IMF estimates the calculations using the total number of words in each report and with an increase in the index, trade uncertainty rises.

According to the index, the recent uncertainty was felt most in the West, followed by Asia-Pacific and Europe, however, it maintained low levels in emerging economies and low-income economies such as Africa, the Middle East, and Central Asia.

The IMF noted that previous WTU pins were observed during the September 11 attacks, the Sars outbreak, 2nd Gulf War, the euro debt crisis, Europe border crisis, the UK's no deal Brexit vote and the latest US presidential election.

After holding steady at normal levels for nearly 20 years, the trade policy uncertainty index rose sharply amid the trade war and increasing tariffs between the United States and China, recording more than 105% in the first quarter of 2019.