Share Price Reactions to Tariﬀ Imposition Announcements in the Trump Era – an Event Study of the Trade Conﬂict
63 Pages Posted: 13 Apr 2021
Date Written: April 12, 2021
Employing a unique sample of 2,849 tariﬀ imposition announcements by and against the United States (U.S.) over the period from 2018 to 2019, this study analyzes the impact of recent tariﬀ announcements on share prices from 859 U.S. companies. We provide evidence for negative (cumulative) average abnormal stock returns due to tariﬀ announcements during a symmetric three-day event window. We suggest that stock market investors expect adverse impacts of tariﬀ impositions, e.g. a decrease in the companies’ future cash ﬂows and a threat of retaliation. The negative wealth eﬀects are observed irrespective of whether the Trump administration announces safeguard tariﬀs to protect domestic ﬁrms or a retaliation is declared by foreign countries. Moreover, building several subsamples, we ﬁnd that the adverse impact is mostly driven by announcements involving China and is associated with a variety of sector, tariﬀ, trade and ﬁrm characteristics.
Keywords: event study, international relations, protectionism, strategic trade policy, tariﬀs, trade conﬂict
JEL Classification: F14, F18, F23, F51
Suggested Citation: Suggested Citation