The Impact of Recent US Tariff Hikes on the Stock Market

Abstract

Since early 2018, the U.S. government's tariff hike policy has triggered multiple rounds of global trade tension, with profound implications for financial markets. This paper investigates the impact of U.S. tariff policy on global stock markets between 2017 and 2025, focusing on S&P 500, CSI 300, and STOXX 50 indices. Using event study methodology and panel regression analysis, this work examines both short-term market reactions and long-term transmission mechanisms. The model incorporates macro control variables (U.S. bond yields, dollar index, and VIX), as well as industry-level trade sensitivity metrics. Results indicate that tariff announcements and implementations significantly depress market returns, especially in China’s A-share market, which shows heightened sensitivity to policy uncertainty. Over the medium to long term, tariffs influence market expectations via earnings forecasts, export dependence, and volatility sentiment. Industries with high trade exposure suffer sustained valuation discounts, even after controlling for fundamentals. Moreover, fluctuations in VIX and the dollar index amplify policy-induced risks across markets. This paper demonstrates that tariffs serve not only as trade instruments but also as key exogenous shocks to global capital markets. The findings offer important insights for investors managing risk under geopolitical uncertainty and for policymakers aiming to balance protectionism with financial stability.