Disruptions to Foreign Trade and U.S. Banks’ Returns

Thiago Revil T. Ferreira, Michele Modugno, Berardino Palazzo and Carlos Ramírez
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Carlos Ramírez: https://www.federalreserve.gov/econres/carlos-ramirez.htm

No 2026-013, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We develop a market-based measure of firms' and industries' exposure to foreign trade disruptions. Combining this approach with detailed supervisory data, we quantify large U.S. banks' exposure to such disruptions and propose a novel bank-level vulnerability index. We show that banks with greater exposure experienced significantly larger stock price declines following the April 2025 tariff announcements. Our vulnerability index explains 18% of the cross-sectional variation in bank returns during this episode.

Keywords: Credit risk; Banks; International trade; Trade policy (search for similar items in EconPapers)
JEL-codes: F13 G21 (search for similar items in EconPapers)
Pages: 11 p.
Date: 2026-02-27
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:102841

DOI: 10.17016/FEDS.2026.013

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