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Short-Term Market Responses to U.S. Tariff Announcements: Evidence from the Steel and Aluminum Sectors

Rahideh, Mahdi LU and Jeppsson, Simon (2025) NEKN02 20251
Department of Economics
Abstract
This study examines the immediate impact of the U.S. steel and aluminum tariff announcement on February 10, 2025, on the stock prices of publicly listed firms in the United States and Japan. Employing a dynamic Difference-in-Differences (DiD) framework, we compare cumulative weekly stock returns of firms in the steel and aluminum sectors (treatment group) with those in other metals and mining sectors (control group) over a 6-week pre-treatment and 2-week post-treatment period. Data are sourced from Bloomberg terminals, with firms selected based on industry classification and market capitalization (≥ $100 million). The analysis incorporates firm and time fixed effects, with standard errors clustered at the firm level, and validates the... (More)
This study examines the immediate impact of the U.S. steel and aluminum tariff announcement on February 10, 2025, on the stock prices of publicly listed firms in the United States and Japan. Employing a dynamic Difference-in-Differences (DiD) framework, we compare cumulative weekly stock returns of firms in the steel and aluminum sectors (treatment group) with those in other metals and mining sectors (control group) over a 6-week pre-treatment and 2-week post-treatment period. Data are sourced from Bloomberg terminals, with firms selected based on industry classification and market capitalization (≥ $100 million). The analysis incorporates firm and time fixed effects, with standard errors clustered at the firm level, and validates the parallel trends assumption through statistical tests. Results indicate that U.S. firms experienced significant positive stock return increases of 6.32 percentage points (p-value = 0.034) and 8.81 percentage points (p-value = 0.003) in the first and second post-treatment weeks, respectively, suggesting investor optimism about reduced import competition. In contrast, Japanese firms showed no significant effect, with coefficients of -0.16 percentage points (p-value = 0.924) and 0.64 percentage points (p-value = 0.647). These findings highlight heterogeneous market responses to protectionist trade policies, contributing to the literature by providing new evidence on sector-specific tariff effects during President Trump’s second term and offering a cross-country perspective. The results inform policymakers and investors about the short-term financial market implications of trade policy shocks. (Less)
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author
Rahideh, Mahdi LU and Jeppsson, Simon
supervisor
organization
course
NEKN02 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Tariffs, Stock Returns, Difference-in-Differences, Financial Markets, Trade Policy, Steel Industry, Aluminum Industry
language
English
id
9209273
date added to LUP
2025-09-12 10:44:03
date last changed
2025-09-12 10:44:03
@misc{9209273,
  abstract     = {{This study examines the immediate impact of the U.S. steel and aluminum tariff announcement on February 10, 2025, on the stock prices of publicly listed firms in the United States and Japan. Employing a dynamic Difference-in-Differences (DiD) framework, we compare cumulative weekly stock returns of firms in the steel and aluminum sectors (treatment group) with those in other metals and mining sectors (control group) over a 6-week pre-treatment and 2-week post-treatment period. Data are sourced from Bloomberg terminals, with firms selected based on industry classification and market capitalization (≥ $100 million). The analysis incorporates firm and time fixed effects, with standard errors clustered at the firm level, and validates the parallel trends assumption through statistical tests. Results indicate that U.S. firms experienced significant positive stock return increases of 6.32 percentage points (p-value = 0.034) and 8.81 percentage points (p-value = 0.003) in the first and second post-treatment weeks, respectively, suggesting investor optimism about reduced import competition. In contrast, Japanese firms showed no significant effect, with coefficients of -0.16 percentage points (p-value = 0.924) and 0.64 percentage points (p-value = 0.647). These findings highlight heterogeneous market responses to protectionist trade policies, contributing to the literature by providing new evidence on sector-specific tariff effects during President Trump’s second term and offering a cross-country perspective. The results inform policymakers and investors about the short-term financial market implications of trade policy shocks.}},
  author       = {{Rahideh, Mahdi and Jeppsson, Simon}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Short-Term Market Responses to U.S. Tariff Announcements: Evidence from the Steel and Aluminum Sectors}},
  year         = {{2025}},
}