Markets May Be Underpricing the Next Trade War Shock

The market appears to have stopped pricing in much of the trade-war risk. Bloomberg’s global trade-policy uncertainty index has fallen to one of its lowest readings of the Trump era, even as a fresh wave of tariffs has taken effect.
The view is that tariffs were absorbed as a one-time hit to prices, while the fear surrounding them faded from markets.
But with trade risks increasingly priced out, the market may have less cushion if the next tariff headline delivers a meaningful shock.