Validation & Backtesting

How PEPIndex is calibrated against historical events and external benchmarks

PEPIndex is calibrated against historical events with well-documented outcomes. Each calibration event carries a pre-calculated composite score and a documented "key gap" between what was announced and what was applied. Resolved calibration events are calibration_locked so their hand-verified values never drift as the live pipeline runs.

Calibration events

Seed events with documented outcomes and pre-calculated composite scores. Authority identifies the legal basis for trade-domain events.
Event	Domain	Authority	Score	Outcome	Key gap
Section 232 Steel/Aluminum Global (2018)	Trade	Section 232	34.0	Partial reversal	25% global → ally exemptions (~45% scope)
Section 301 China Trade War / Phase One (2018–2020)	Trade	Section 301	53.0	Partial reversal	25% on $267B → 12.5% avg (Phase One)
Canada/Mexico Steel USMCA Removal (2018–2019)	Trade	Section 232	82.0	Full reversal	Steel tariffs → zero for CA/MX
North Korea: Fire and Fury (2017)	Foreign	—	95.5	Full reversal	Military threat → summit
Afghanistan: Wipe Off the Earth (2019)	Foreign	—	97.0	Full reversal	Destruction → peace deal
IEEPA 10% Baseline + Sec 122 (2025)	Trade	IEEPA, Section 122	91.0	Full reversal	Universal surcharge → dual court invalidation
Greenland Annexation (2025)	Foreign	—	90.5	Full reversal	Acquisition → dropped
Russia: Extreme Consequences (2025)	Foreign	—	88.0	Reframed	Consequences → summit
Liberation Day: 145% on China (2025)	Trade	IEEPA	82.1	Partial reversal	145% → 28.3% applied
14-Country Tariff Deadline (2025)	Trade	IEEPA	60.5	Delayed	Full tariffs → frameworks
Pharma Tariffs 100% (2025)	Trade	IEEPA, Section 232	56.3	Delayed	100% → Section 232 path
Section 232 Steel/Al/Copper 50% — Proclamation 11021 (2026)	Trade	Section 232	24.0	Partial reversal	50% → tiered 10–15% caps
Section 232 Metals Amendment (2026)	Trade	Section 232	—	Pending (monitoring)	50% regime amended: ally caps 15%, derivatives 10%

External validation benchmarks

ECFR force-threat follow-through. An analysis of presidential military-force threats found a 9.1% follow-through rate (2 of 22 tracked) — the empirical anchor for the foreign-policy domain's high baseline reversal expectation.
Retail price pass-through. The 24% retail pass-through rate for the 2025 tariffs is used to validate the economic-impact calculations for trade-domain events.
First-term trade-war rate references. Source for first-term calibration events (TACO-2018-*): dates, rates, and Phase One deal terms.
Yale Budget Lab Tariff Tracker. Independent cross-check of the import-weighted effective tariff rate and PCE goods/durables pass-through ranges.
Federal Register Proclamation 11021 (FR 2026-06960; 91 FR 18201) and its June 2026 amendment — source of record for the 2026 Section 232 metals events.

Known limitations

Classification subjectivity. Some events involve judgment about whether a statement is a genuine threat or rhetorical posturing; inter-rater testing mitigates but does not eliminate this.
Outcome timing. "Resolution" can be ambiguous for quietly-abandoned threats; a 180-day monitoring window bounds this, after which non-trade lapses finalize to indeterminate (not scored).
Causal attribution. Post-announcement price moves may reflect concurrent factors; the four-group event-study design controls for trend but causal identification is imperfect.
Non-trade economic impact. Quantified economic impact is currently limited to trade-domain events; foreign-policy and domestic events are scored behaviorally only.
Political neutrality. A high PEPI score means a threat was not followed through — it makes no normative judgment about whether follow-through would have been desirable.

Full source-by-source lineage, scoring examples, and version history are in the 📄 methodology whitepaper. Per-event provenance (Federal Register links, statutory authority, court rulings, tariff-rate snapshots) is available through the API.