Tariffs announcement as a global stress test: Early stock market reactions to U.S. protectionism

We study initial global equity market reactions to the reciprocal tariffs announced by the U.S. President Donald Trump on April 2, 2025. Using daily returns from 67 countries, we find a sharp and widespread decline in stock prices over the four-day window following the announcement. Market reactions varied across countries. Markets with higher trade exposure and those running trade surpluses experienced larger declines, suggesting that more open economies were perceived as more vulnerable to future trade frictions. In addition, larger markets and countries with higher unemployment or inflation faced steeper losses — likely due to concerns over export competitiveness or macroeconomic fragility. In contrast, countries with stronger GDP growth were more resilient. These findings suggest that investor reactions were shaped by a combination of direct trade exposure and broader structural factors linked to long-term vulnerability. • Global stock indices fell sharply after Trump’s April 2025 tariff announcement. • Trade-surplus and open economies saw the steepest equity market losses. • Higher inflation and unemployment magnified negative investor responses. • Faster GDP growth shielded some markets from tariff-related shocks. • Larger, more competitive markets were perceived as key U.S. targets.