The Cost of Uncertainty: Quantifying the impact of policy volatility on investment in the global economy

On behalf of the International Chamber of Commerce, Oxford Economics quantified the impact of policy uncertainty on business investment in 2025 across ten major economies – the United States, Canada, Mexico, Brazil, United Kingdom, EU-4 (France, Germany, Italy, Spain), Japan, South Korea, China and India. Oxford Economics then modelled two scenarios for 2026: an adverse scenario marked by a fast increase in policy uncertainty, and a favourable scenario characterised by greater policy clarity.

Policy uncertainty – as measured by the global economic policy uncertainty index – reached unprecedented levels last year, driven primarily by the volatility around the 2 April Liberation Day tariff announcement, among other headwinds. Using an econometric modelling approach to quantify the historical relationship between uncertainty and investment, Oxford Economics estimates that headwinds from uncertainty cost US$ 202 billion in lost or delayed business investment in 2025, with Canada and Mexico bearing the brunt of the impact.

Under an adverse scenario for 2026, in which policy uncertainty rises again to unprecedented levels, business investment is estimated to fall by US$ 380 billion, while under a favourable scenario in which the policy uncertainty indices fall, business investment recovers by US$ 252 billion.

The results and modelling methodology highlight how policy uncertainty in itself negatively impacts business investment and economic growth – independent of the actual policies that materialise and of existing macroeconomic headwinds. These findings hold clear implications for policymakers about the value of policy clarity and certainty as its own policy lever.

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The experts behind the research

Elizabeth Rust

Lead Economist

Elizabeth Rust

Lead Economist

Elizabeth Rust is Lead Economist with Oxford Economics Macro Consulting, where she leads bespoke engagements with corporates, trade associations and government clients in applied macroeconomic analysis to inform strategic planning and policy development. Her areas of expertise include global macroeconomics, international trade, logistics and supply chain, energy and commodity markets, and payments, with regional specialisms in the US, UK and European economies.

Prior to joining Oxford Economics, she was Practice Lead for Trade Analysis with Expeditors, a global logistics company, and Head of Global Economics with FrontierView. She holds a MA in international economics from Johns Hopkins University (SAIS) and a BA, magna cum laude, from Cornell University.
Thang Nguyen-Quoc

Associate Director, Macro Consulting

Thang Nguyen-Quoc

Associate Director, Macro Consulting

Thang Nguyen-Quoc, Ph.D. leads Oxford Economics Asia’s Macro consulting team in Singapore. In this capacity, he supports clients with carrying out bespoke forecast and scenario modelling, as well as thought-leadership reports on trade and green transition. His core expertise is in policy analysis related to international trade and investment. His doctoral thesis evaluated the impacts of digitalization, protectionism and regionalism on the trade patterns of developing countries, using a range of econometric techniques.

Prior to joining OE in 2022, Thang spent a decade delivering flagship economic reports on Asian and African economies at the Organisation for Economic Cooperation and Development (OECD) in Paris. He also worked in various roles at the World Bank, National Academy of Social Sciences (US), and Vietnam Commercial Bank. He got a Ph.D. in International Economics from University Paris-Dauphine, M.Sc. from Barcelona School of Economics and B.A. from Ohio Wesleyan University.