Financial market reactions to U.S. tariff announcements: Evidence from trade-surplus and trade-deficit countries

Amar Rao, Brian Lucey and Satish Kumar

Finance Research Letters, 2025, vol. 81, issue C

Abstract: This study examines the financial market response to the U.S. tariff announcement on February 1, 2025, which imposed a 25 % tariff on imports from Mexico and Canada (except energy products at 10 %) and a 10 % tariff on China. The results reveal asymmetric market reactions: trade-deficit countries, which faced direct tariff impositions, exhibited muted and mixed responses, suggesting that investors had already priced in potential trade frictions or expected policy reversals. In contrast, trade-surplus countries experienced significant positive CAARs, reflecting investor optimism about potential trade reallocation benefits.

Keywords: Equity; Event-study; Markets; Tariff; Trade; Uncertainty (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s154461232500724x

DOI: 10.1016/j.frl.2025.107465

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