U.S. President Donald Trump greets business leaders at the beginning of a policy forum in the State Dining Room at the White House on Feb. 3, 2017.Chip Somodevilla/Getty Images
You have to feel for Stephen Poloz.
The world has been a volatile place since he took the helm of the Bank of Canada in 2013. The post-financial-crisis recovery stalled. Commodity prices collapsed. Exports sagged.
And then along comes Donald Trump.
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Mr. Poloz acknowledged last week that the bank's forecasting models were blindsided by the deep and persistent aftershocks of the global financial crisis. He pledged to develop even more sophisticated computer models to help the bank sort through the new risks buffeting the economy.
What Mr. Poloz desperately needs is a model to predict what Mr. Trump will do next. He could use the Trump Prognosticator 1.0 – a powerful science-based tool to eliminate the guesswork.
The new U.S. President has emerged as the greatest source of global economic uncertainty. Armed with a Twitter account, a pen and his mouth, Mr. Trump and his team are whipsawing stocks, currencies and bond markets, on a near-daily basis. His outbursts about trade and immigration are sowing fear and uncertainty among business leaders, governments and central bankers.
No one really knows what he's going to do next, including the Bank of Canada.
"For us, this is a question of not really knowing what's to come," Mr. Poloz bluntly told reporters Tuesday after a speech in Edmonton last week.
The threat of a U.S. border tax and other protectionist measures hang over Canada's economy like a guillotine. The uncertainty alone may already be affecting investment decisions.
But how and when will these measures take effect, and at what cost? Could Canada escape the carnage altogether?
"We can't model [the risks] without knowing what they will be, and frankly even when we know what they are, they will be very complex questions," he said.
Central bankers love to know with some certainty what lies ahead. Their main policy tool – short-term interest rates – can take up to two years to have any effect on inflation. So they are forever gazing at the horizon.
So wouldn't it be great if Mr. Poloz could simply plug in the various policy options into the Trump Prognosticator 1.0. The model would magically spit out the probabilities of various events – dissolving NAFTA (10 per cent), renegotiation (90 per cent) or a U.S. border tax (30 per cent). The model would then calculate the resulting impact on Canadian GDP of these various risks.
Some of what Mr. Trump is proposing might even be good for Canada. There is a significant probability that tax breaks and infrastructure spending will boost U.S. growth, and drive Canadian exports. Technology companies and other Canadian businesses may gain access to a pool of talented workers turned away from the United States by Mr. Trump's stricter visa and immigration policies.
It will take a sophisticated model to sort out all the potential outcomes. Many policies cut both ways. Lower U.S. personal and corporate tax rates could make Canada a less-attractive place to invest. Stricter immigration policies could make it harder for Canadians to work in the U.S. and for Canadian companies to do business there.
The problem, of course, is that Mr. Trump is one the most volatile presidents in U.S. history. Even inside the White House and the administration, signs of division are beginning to emerge, leading to even more confusion on where policy is headed.
Congress, where the fate of much of Mr. Trump's agenda will ultimately be decided, is another source of uncertainty. Sure, Republicans control both the House and the Senate, which should make it easier to get things done. Not necessarily this time. Republicans don't trust their mercurial President to fully back their agenda.
And yet Republicans know they have a narrow window – perhaps two years – to pass key initiatives, such as tax reform and overhauling Obamacare. They need Mr. Trump's co-operation, and so many are reluctant to cross him.
The idea of a Trump Prognosticator is, of course, pure fantasy. Mr. Trump can't be modelled with any degree of credibility.
The United States has traditionally been a rock for the global economy.
No longer. It is now its greatest source of instability.
So throw away the models and get ready for a wild and unpredictable ride.