The effect of trade policy uncertainty on bank credit: evidence from the United States

This paper examines the effect of trade policy uncertainty (TPU) on bank credit growth. Using a panel dataset of 637 banks in the United States over the period 2005–2024, the findings indicate that TPU significantly reduces bank credit growth, with a more pronounced effect for global than for domestic TPU. The baseline results remain robust after addressing potential endogeneity issues through two-stage least squares (2SLS) estimations. Further analysis reveals that while TPU generally constrains bank credit growth, this negative relationship becomes significantly weaker and may even reverse during major global crises, particularly the Global Financial Crisis and the COVID-19 pandemic. These findings provide essential implications for both bank managers and policymakers, highlighting the importance of accounting for macroeconomic conditions when designing lending strategies and policy responses during periods of elevated TPU.