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Share price reactions to tariff imposition announcements in the Trump era - An event study of the trade conflict

Sascha Tobias Wengerek ()
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Sascha Tobias Wengerek: University of Paderborn

No 59, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

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 (search for similar items in EconPapers)
JEL-codes: F14 F18 F23 F51 (search for similar items in EconPapers)
Pages: 63
Date: 2020-02
New Economics Papers: this item is included in nep-int
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