Trump causes trade uncertainty to skyrocket

On the radar

• Donal Trump was sworn in as 47th US president.

• Unemployment rate in Slovakia went up to 5% in December.

• Today in the region, in Slovenia producer prices will be published at 10.30 AM CET.

• At 11 AM CET, Croatia will release unemployment rate (December) and wage growth (November).

• There are no further releases scheduled.

Economic developments

On Monday, January 29, Donald Trump was sworn in as 47th US president and at this occasion we look at the Trade Policy Uncertainty index today (TPU). Although there was no immediate announcement on tariffs on all trade partners (at this point there is a plan to impose 25% tariffs on Canada and Mexico), the uncertainty how the global trade will look like is very high. Actually, TPU has skyrocketed most recently. The TPU index is based on automated text searches of the electronic archives of seven newspapers: Boston Globe, Chicago Tribune, Guardian, Los Angeles Times, New York Times, Wall Street Journal, and Washington Post. The measure is calculated by counting the monthly frequency of articles discussing trade policy uncertainty (as a share of the total number of news articles) for each newspaper. The index is then normalized to a value of 100 for a one percent article share. The paper authored by Caldara, Dario, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino, and Andrea Raffo documents that increases in TPU reduce investment and activity using both firm-level and aggregate data.

Market movements

As for other market related news, in Poland the central banker Kotecki said that interest rate cuts are likely as of July 2025 that is after presidential elections scheduled for May 18 and June 1. Kotecki sees the space for 100 basis points cuts this year and disagrees with Governor Glapinski regarding the delay of monetary easing until 2026. The CEE currencies began the week strengthening against the euro, while the long end of the curve moved down, including Romania. Romania sold the planned amount of bonds maturing in 2038. The government papers were priced to yield 7.9%, the highest in roughly two years. The Slovak Debt Agency aimed to raise EUR 600 million but accepted bids totaling €812 million of bonds with maturities ranging from 2028 to 2043 due to high demand.

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