Share Price Reactions to Tariff Imposition Announcements in the Trump Era – an Event Study of the Trade Conflict

63 Pages Posted: 13 Apr 2021

See all articles by Sascha Tobias Wengerek

Sascha Tobias Wengerek

Paderborn University - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance

André Uhde

University of Paderborn - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance

Date Written: April 12, 2021

Abstract

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

Wengerek, Sascha Tobias and Uhde, André, Share Price Reactions to Tariff Imposition Announcements in the Trump Era – an Event Study of the Trade Conflict (April 12, 2021). Available at SSRN: https://ssrn.com/abstract=3824616 or http://dx.doi.org/10.2139/ssrn.3824616

Sascha Tobias Wengerek (Contact Author)

Paderborn University - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance ( email )

Warburger Str. 100
Paderborn, D-33098
Germany

HOME PAGE: http://www.upb.de/finance

André Uhde

University of Paderborn - Faculty of Business Administration and Economics - Department of Taxation, Accounting & Finance ( email )

Warburger Str. 100
D-33098 Paderborn
Germany

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