Sub-wavelength grating micro-displacement detection technology offers advantages such as high precision, strong resistance to electromagnetic interference and fast response. However, errors are inevitable during the fabrication of sub-wavelength gratings. This paper employs Rsoft simulation software to systematically model and analyze the impact of processing tolerances, specifically periodic error, thickness variation, duty cycle deviation, and interlayer spacing error, as well as the influence of source wavelength, laser mode, and polarization angle. The simulation results indicate that the grating period error must be less than ±0.01 μm, the thickness tolerance should be controlled within ±100 nm, the optimal duty cycle is 0.5, and the allowable error for the double-layer grating interlayer spacing is ±0.2 μm. The simulation results show that the system achieves peak detection sensitivity when a 1550 nm wavelength transverse magnetic (TM) mode laser is used. Additionally, the diffraction efficiency of the grating decreases as the laser polarization deviates from the grating line orientation. This research provides a theoretical basis for subsequent error compensation and system optimization, thereby maximizing the displacement detection sensitivity based on sub-wavelength grating waveguide mode coupling.