 U.S. tariffs and stock pricesFinance Research Letters, 2025, vol. 83, issue C Abstract: This study investigates the effects of U.S. tariffs and concurrent trade policy uncertainty on major U.S. stock indices. Employing a structural vector autoregression model with monthly data, we analyze the responses of the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average while controlling for macroeconomic factors of oil prices, economic activity, inflation, exchange rates, and interest rates. The empirical results show that one standard deviation shocks to tariffs, representing concrete policy actions, cause significant long-run reductions in stock prices, ranging from 7.33 % to 10.13 % across indices after two years. One standard deviation shocks to trade policy uncertainty also cause significant long-run reductions, ranging from 6.57 % to 10.05 % across indices after two years. The corresponding variance decomposition analyses further show that shocks to tariffs and trade policy uncertainty collectively explain up to 7.9 %, 8.2 %, and 9.9 % of the forecast error variance for the S&P 500, Nasdaq, and Dow Jones indices, respectively. Keywords: Tariffs; Trade policy uncertainty; Stock prices; S&P 500; Nasdaq; Dow Jones (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325009663 DOI: 10.1016/j.frl.2025.107708 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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