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The impact of US reciprocal tariff announcements on global stock markets: an event study analysis

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  • Rahul Kumar

  • Faten Moussa

Abstract

This study examines the impact of the April 2025 US reciprocal tariff announcement on the stock markets of 47 countries using an event study methodology. Analyzing daily index returns across multiple event windows, we find significant negative cumulative abnormal returns (CAAR = -1.43%, p<0.01) over the [-7,+10] window, with the strongest reactions occurring within three days post-announcement. Affected countries experienced more severe declines (CAAR = -2.40%) than unaffected nations, while developed markets (-3.55%) showed greater vulnerability than emerging markets. Robustness tests confirm these findings across alternative methodologies. The results demonstrate that reciprocal tariffs, which explicitly incorporate retaliation mechanisms, generate stronger market reactions than unilateral measures, with implications for investors, policymakers, and multinational corporations navigating trade policy uncertainty.

Suggested Citation

  • Rahul Kumar & Faten Moussa, 2024. "The impact of US reciprocal tariff announcements on global stock markets: an event study analysis," International Journal of Accounting, Business and Finance, Indian Accounting Association, Patna Branch, vol. 4(1), pages 26-37.
    • Handle: RePEc:dbs:ijabfi:v:4:y:2024:i:1:p:26-37:id:205
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    1. Kolari, James W. & Pynnonen, Seppo, 2011. "Nonparametric rank tests for event studies," Journal of Empirical Finance, Elsevier, vol. 18(5), pages 953-971.
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