Tariff exposure and sectoral vulnerability: Evidence from equity market responses to the 2025 U.S. trade shock

Tomasz Kaczmarek, Ender Demir, Wael Rouatbi and Adam Zaremba

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: We analyze global stock market reactions to the U.S. tariff announcement of April 2, 2025, using daily returns across 11 major industries in 67 countries. Equity prices fell sharply, particularly in energy, basic materials, and technology. The cross-country variation reflects three main drivers: tariff exposure, technological competitiveness, and sector-specific valuation profiles. Countries with larger, wealthier, and more innovation-oriented markets experienced steeper losses, suggesting that investors viewed them as a greater competitive threat to U.S. producers. Within sectors, investors favored firms perceived as safer. Structural vulnerabilities, rather than direct trade exposure, were the primary drivers of market reactions.

Keywords: Tariffs; Trade policy; International stock markets; Protectionism; Event study; Market reaction; International finance (search for similar items in EconPapers)
JEL-codes: G00 G11 G12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001813

DOI: 10.1016/j.ribaf.2025.102925

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