Asymmetric effects of tariffs on stock prices: Evidence from the US

This letter investigates whether US tariff hikes and cuts asymmetrically affect stock market returns over the last three decades. The analysis relies on a Nonlinear Autoregressive Distributed Lag (NARDL) model combined with an augmented version of the time-varying Granger causality test to account for asymmetric responses and evolving causal dynamics. We find that, in the short term, tariff hikes lead to an initial drop in returns followed by a partial recovery. In the long term, both hikes and cuts lower stock returns, suggesting that the market sees trade policy shifts as a persistent source of uncertainty. Causality tests further confirm that the effects of tariff hikes are stronger and more enduring than those of cuts, particularly during the Trump administrations.