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Red card for Trump
This article is published in partnership with Dialogues économiques, produced by Aix-Marseille School of Economics (AMSE).
“I have instructed my Secretary of Commerce to add an ADDITIONAL 25% tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA This will go into effect TOMORROW MORNING.”
Since returning to the White House, Donald Trump has made tariffs one of his preferred political arguments. Through a steady stream of social media posts, he has rolled out targeted tariff escalations that repeatedly catch America’s trading partners off guard.
During his inauguration speech on 20 January, 2025, the US president famously declared that “tariff” was “the most beautiful word in the dictionary”. Since then, he has multiplied announcements and reversals alike. The result has been sharp tariff volatility – that is, major fluctuations around the average level of duties imposed.
Complete chaos
In February 2026, Bernd Lange, Chair of the European Parliament’s Committee on International Trade, summed up the situation bluntly on X: it was “total chaos on the customs front . Everyone’s completely lost”.
Yet Donald Trump continues to defend this policy as key to securing prosperity for US citizens. Those who oppose tariffs, he insists, “are IDIOTS! We are now the richest and most respected country in the world”, he claimed on Truth Social on 9 November 2025.
But sudden and repeated changes in import duties create uncertainty for both businesses and households, making it difficult to plan spending, investment, or hiring decisions. This raises a central question: does Trump’s tariff policy truly protect the US economy, or is it ultimately undermining it instead?
Measuring uncertainty
Economists’ interest in uncertainty is not new. In fact, this field of research has expanded considerably over the past decade, particularly after the unexpected Brexit vote in 2016. Measuring instability, however, remains difficult1. Three main approaches have been investigated.
In 2016, using textual analysis of hundreds of newspaper headlines, a team of economists developed an “Economic Policy Uncertainty” index (EPU)2, which has risen sharply since 2025.
Unpredictability can also be measured through market volatility, as with the VIX, created by the Chicago Board Options Exchange and sometimes nicknamed the “fear index”3. The VIX shows that periods of high variability have coincided with severe economic crises, like in 2008 and during the 2020 pandemic.
Finally, a third way of measuring uncertainty relies on surveys conducted among businesses, particularly regarding their expectations for future activity.
The economists Céline Poilly and Fabien Tripier, for their part, developed a new indicator linked specifically to trade policy by examining tariff volatility and its impact on the US economy at the regional level.
Tariffs under extreme pressure
Measuring fluctuation in tariffs applied to imports into the United States is more complex than it may seem. Customs duties depend not only on the country of origin of imported goods, but also on the type of product involved. For a US car manufacturer, importing steel from China or from Canada is not the same thing in terms of customs barriers.
Rather than attempting to reproduce every decision affecting US imports, the researchers simply relied on the actual amount of tariff revenue collected each month. This data is published sector by sector by US customs authorities. The scientists then divided this amount by the real value of imported goods, which enabled them to calculate a sectoral tariff rate. In this way, they established the evolution of tariff rates between 2008 and 2020 across 15 industrial sectors, including transportation, chemicals, wood, and metallurgy.
They then calculated a variability index – the TPU, or “Trade Policy Uncertainty” index. The farther a tariff rate deviates from its average level, the greater its volatility. Some products experienced particularly high instability in 2018, especially metals, which underwent a genuine “volatility shock” during the Trump administration’s first trade war.
States highly impacted
Once this index had been established, the researchers examined the economies of different US states according to their degree of exposure to tariff volatility. Depending on the sectoral composition of their imports, states are more or less exposed to uncertainty. New York, for example, relies heavily on imports in sectors such as “stone and glass” and “textiles”, where tariffs experienced especially unstable swings.
The team found that states most exposed to tariff fluctuation suffered deeper recessions, with the economic downturn peaking roughly two years after the initial shock itself.
According to the scientists, this recession – reflected in a decline in state-level GDP – results from two mechanisms. First, uncertainty causes worried households to increase savings at the expense of consumption. Second, it encourages companies to raise their profit margins.
Trump’s customs policy takes its toll on the US
This volatility also has a direct impact on the jobs of US workers. The stakes are high for Donald Trump, who promoted these tariffs as a shield designed to protect American labour. Politically, the message proved effective: during the 2016 presidential election, part of the working class in the Rust Belt – a region in the northeastern United States marked by decades of deindustrialisation and unemployment – turned away from the Democratic Party to support the Republican candidate.
Unfortunately for those voters, the choice appears to have delivered little benefit. The researchers show that the US states most exposed to tariff uncertainty – particularly those in the Rust Belt – also experienced the steepest declines in total hours worked.
Moreover, the drop was driven not by shorter working hours, but by falling employment levels: concerned businesses postponed hiring decisions. The downturn was especially severe in manufacturing, which was hit harder than the services sector.
The United States is therefore paying a heavy price for the American president’s tariff policy, contradicting the promises made during his election campaigns. Donald Trump has repeatedly praised his protectionist agenda as the only way to safeguard American citizens, especially his blue-collar electoral base. Yet imposing abrupt and unpredictable tariff increases at will is beginning to backlash.
Whether tariffs rise or fall, one thing will never change: economic actors loathe uncertainty.
Scientific references
• C. Poilly, F. Tripier, “Trade Policy Uncertainty and the Labor Market: State Level Evidence”, American Economic Review Papers and Proceedings, 2025
• C. Poilly, F. Tripier, “Regional Trade Uncertainty”, Journal of International Economics, 2025
- 1. Hites Ahir, Nicholas Bloom, Davide Furceri, “Uncertainty about uncertainty”, International Monetary Fund.
- 2. See: https://policyuncertainty.com/
- 3. “Measuring fear: what the VIX reveals about market uncertainty”, Federal Reserve Bank of St. Louis’ website, 13 February 2025: https://fredblog.stlouisfed.org/2025/02/measuring-fear-what-the-vix-reve...
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Author
Working since 2009 at the CRH-Centre de recherches historiques1, Hélène Frouard heads research projects on the history of housing as part of the collective work of the Esopp team. In paralllel, she continues to promote and disseminate scientific culture to a number of audiences (...