Higher-order co-moment contagion during Trump’s second presidential term: A trade policy uncertainty perspective

Donald Trump's second presidential term continues to shape economic and trade policies as well as the dynamics of financial markets. In this paper, we examine whether U.S. trade policy uncertainty (TPU) under Trump’s second term triggers financial contagion with asset classes through higher-order moments of asset returns. Our analysis extends recent studies that consider abnormal returns and the dynamics of asset correlations around the tariffs announcements and contributes to the literature that links political transitions and trade policy uncertainty with financial markets beyond the first and second moments by considering higher-order comoment contagion. Using daily data on U.S. equities, U.S. treasury and corporate bonds, U.S. dollar index, gold, crude oil, and Bitcoin, we consider the 2024 U.S. presidential election, 2025 presidential inauguration, and liberation day. Overall, the results show evidence of contagion in co-volatility, co-skewness, and co-kurtosis between US trade policy uncertainty and each of the examined assets following the three events. This highlights the substantial exposure of these assets to Trump's proposed tariffs, which has important implications for the decision-making processes of various economic actors.