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

Author

Listed:
  • Kaczmarek, Tomasz
  • Demir, Ender
  • Rouatbi, Wael
  • Zaremba, Adam

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.

Suggested Citation

  • Kaczmarek, Tomasz & Demir, Ender & Rouatbi, Wael & Zaremba, Adam, 2025. "Tariff exposure and sectoral vulnerability: Evidence from equity market responses to the 2025 U.S. trade shock," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001813
    DOI: 10.1016/j.ribaf.2025.102925
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    References listed on IDEAS

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    2. Gökgöz, Halilibrahim & Syed, Aamir Aijaz & Gheorghe, Catalin & Jeribi, Ahmed, 2026. "Quantile-frequency dependence between U.S. sector stock indices and macro-financial indicators: A quantile coherence approach," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
    3. Nie, Chun-Xiao, 2025. "Trump tariff policies shock information flows across major global equity markets," Finance Research Letters, Elsevier, vol. 86(PA).
    4. Bouri, Elie & Jalkh, Naji & Demir, Ender, 2025. "Higher-order co-moment contagion during Trump’s second presidential term: A trade policy uncertainty perspective," Research in International Business and Finance, Elsevier, vol. 79(C).
    5. Kapar, Burcu & Buigut, Steven & Billah, Syed Mabruk, 2025. "The short-term reaction of financial markets to the U.S. trade tariff announcement," Finance Research Letters, Elsevier, vol. 86(PB).
    6. Kaczmarek, Tomasz & Demir, Ender & Rouatbi, Wael & Zaremba, Adam, 2025. "Tariffs announcement as a global stress test: Early stock market reactions to U.S. protectionism," Finance Research Letters, Elsevier, vol. 85(PD).

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    Keywords

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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