Only one month has passed since the US presidential election, but the analyst chief has already rotated the potential impact of trade policy. President Trump is threatening many tariffs, and researchers wonder which one they chase and what the asset prices are.
Academic Economists hate tariffs for various reasons. The main one is that they help a few people at the expense of long -term economic growth, which are possible.[i]
Recent surveys have suggested that the target duties for 2018 and 2019 had only a simple effect on the financial markets.[ii] In a Liberty Street blog, New York Fed's economist showed a negative response to tariffs imposed by the Trump administration at the time of announcement, but not before. [iii] The stock decreased when the tariffs hit at least for a while. Specifically, researchers have fallen on other economic news, which may fall on the day of the US stocks (tariffs days), and this change may affect the stock price. I did.
This blog uses a simpler approach to extend some of their analysis into small stocks and small shares in major foreign markets. I clearly show the change in accordance with the tariffs of safe assets (10 years of the United States Finance) and the propelled propelled of volatility (proxy by VIX). In addition, the average return on the date of the tariff is actually different from the non -tariff days.
We make sure that the date of the tariff is really bad for the stocks overseas. SAFE-HAVEN ASETS (declared by the 10-year US Treasury) has protected capital, as investors wanted. In addition, tariffs did not seem to have a permanent impact on the expected US stock market volatility. VIX returns to the level before the tariff immediately after the tariff impact.
These response is unlikely to happen by chance, but cannot eliminate prejudice.
My analysis is executed in R, and the data used is available from Yahoo Finance and Fred. The tariff date is taken from the New York FED blog.[iv] For those who want to copy or change analysis, R code is available online.
What happened on the tariff day?
Table 1 is a change in the daily price refund rate of S & P 500 indexes (Sp_chg), Russell 2000 index (Rut_chg), FTSE 100 Index (FTSE_CHG), DAX Index (DAX_CHG), NIKKEI 225 Index. (NIKKEI_CHG) and a 10 -day tariff Hang Seng index (HSI_CHG) were imposed. VIX (VOL_CHG) 10 -year US Treasury (Ten_chg) uses the level difference. On the date of the tariffs, a specific foreign market was closed, and in that case the return was “NA”.
As the New York FED researchers have discovered, the average publication of tariffs is consistent with the average decline in the stock market, the rise in US financial prices in 10 years, and the expected volatility.
Table 1. What happened when the tariffs of 2018 and 2019 were hit.
| date | Sp_chg | rut_chg | ftse_chg | Dax_chg | nikkei_chg | Hsi_chg | Vol_chg | Ten_chg |
| 2018-01-23 | 0.217 | 0.345 | 0.213 | 0.712 | 1.292 | 1.659 | 0.070 | -0.030 |
| 2018-03-01 | -1.332 | -0.335 | -0.778 | -1.969 | -1.558 | 0.647 | 2.620 | -0.060 |
| 2018-03-22 | -2.516 | -2.243 | -1.227 | -1.698 | NA | -1.093 | 5.480 | -0.060 |
| 2018-03-23 | -2.097 | -2.189 | -0.442 | -1.767 | -4.512 | -2.452 | 1.530 | -0.010 |
| 2018-06-15 | -0.102 | -0.048 | -1.698 | -0.737 | 0.498 | -0.429 | -0.140 | -0.010 |
| 2018-06-19 | -0.402 | 0.058 | -0.359 | -1.217 | -1.772 | NA | 1.040 | -0.030 |
| 2019-05-06 | -0.447 | 0.059 | NA | -1.014 | NA | -2.898 | 2.570 | -0.030 |
| 2019-05-13 | -2.413 | -3.178 | -0.550 | -1.519 | -0.720 | NA | 4.510 | -0.070 |
| 2019-08-01 | -0.900 | -1.515 | -0.025 | 0.526 | 0.090 | -0.763 | 1.750 | -0.120 |
| 2019-08-23 | -2.595 | -3.088 | -0.466 | -1.154 | 0.402 | 0.501 | 3.190 | -0.100 |
| average | -1.259 | -1.213 | -0.593 | -0.984 | -0.785 | -0.604 | 2.262 | -0.05 |
Source: Yahoo Finance, Fred
The importance of effects
The change in Table 1 looks great, but they look big Ready For chance. At least in the short term, we estimate the form of the form to strengthen the main discovery that tariffs are bad for stocks.
Daily change = constant +tariff +error. Customs duties are dummy variables using simple linear regression. Table 2 reports the results of this average comparison.
The estimated value of the tariff is indicated in the first line (customs duties), but the average return of the non -tariff date is shown in the second row (constant). The standard error is in parentheses below the estimated values, and the significance is indicated by an asterisk that uses typical rules, as described in the table notebook.
The average of the last line in Table 1 is of course equal to the tariff coefficient of Table 2 and the estimated value. There was no need to do a regression to estimate the average effect. Rather, the value of this exercise is an error estimation value, which can determine the importance.
Table 2. Regarding regression results.
| Subordinate variable | ||||||||
| Sp_chg | rut_chg | ftse_chg | Dax_chg | nikkei_chg | Hsi_chg | Vol_chg | Ten_chg | |
| Tariff | -1.321*** | -1.258** | -0.605* | -1.022*** | -0.818* | -0.585 | 2.273*** | -0.053*** |
| (0.394) | (0.506) | (0.343) | (0.390) | (0.461) | (0.522) | (0.660) | (0.018) | |
| Constant | 0.062** | 0.045 | 0.013 | 0.038 | 0.033 | -0.019 | -0.011 | 0.001 |
| (0.030) | (0.038) | (0.025) | (0.030) | (0.033) | (0.037) | (0.050) | (0.001) | |
| observation | 1,743 | 1,743 | 1,679 | 1,689 | 1,549 | 1,589 | 1,743 | 1,742 |
| R2 | 0.006 | 0.004 | 0.002 | 0.004 | 0.002 | 0.001 | 0.007 | 0.005 |
| Note: *P <0.1; **P <0.05; ***P <0.01 | ||||||||
| Source: Yahoo Finance, the return of the author | ||||||||
The impact of tariffs on large-scale shares is very important (T-Static = 3.4), and the impact on small shares is not so (T = 2.5). The accuracy of the foreign market estimation for tariff announcement is a mixed bag. Only the DAX response was remotely and accurately estimated (T = 2.6). Interestingly, the average return of Hang Seng Index is not statistically different on the date of the tariff announcement. On these days, customs duties seem to damage us and other developed markets rather than Chinese shares. On the other hand, the reaction of safety assets (T = 2.9) and tariffs (T = 3.4) is a expected sign and is reasonably powerful. (Technical note: These conclusions are not changed even if you use the “Robust” standard error).
Sorry readers may still be doubtful about the causal relationship. My simple model has no control. I am not trying to eliminate other possibilities for dependent variables. But New York FED researchers did this -it was certainly for US stocks -it did not change their conclusions.
By checking my results rugged to other economic development, from a short blog post to a full -fledged research project, I have not witnessed the development of market changes in tariff days. It depends on the discovery of, and leaves a more strict treatment. Future research.
Customs tax volatility disappears
Readers may remember that the stock market was weak in 2018 and very strong in 2019. This suggests that the scheme of things may be just a brip that the negative impact of customs duties imposed during that period. This is true when using VIX change as a scale of tariff destructive properties.
Chart 1 indicates the VIX level in 2018 and 2019, and is shown in the duties of red triangles and non -tariff days on the duties. Table 3 shows the level of VIX one day before (column 2), then the Corontary 3, 5, and 10 days later on customs duties (Colont 3), and then Colorado 4-7. It is shown.
A quick visual inspection on chart 1 shows that VIX spikes usually reverses immediately after the tariff date. Table 3 allows more accurate conclusions. At 70 % of the tariff days of 2018 and 2019, VIX returned to the next or so before the customs duties.
Finally, more strictly, I checked the VIX level and the sustainability of the daily change (self -correlation), and there was no average on average on the average dutch compared to the non -tariff date. The impact of the publication of tariffs on VIX is in a break.
Chart 1. VIX level, 2018 to 2019.
Source: Yahoo Finance
Table 3. Before VIX and after tension.
| date | pref_tariffF | Tariff | post_one | post_three | post_five | post_ten |
| 2018-01-23 | 11.03 | 11.10 | 11.47 | 11.08 | 14.79 | 29.98 |
| 2018-03-01 | 19.85 | 22.47 | 19.59 | 18.36 | 16.54 | 16.59 |
| 2018-03-22 | 17.86 | 23.34 | 24.87 | 22.50 | 19.97 | 21.49 |
| 2018-03-23 | 23.34 | 24.87 | 21.03 | 22.87 | 23.62 | 21.77 |
| 2018-06-15 | 12.12 | 11.98 | 12.31 | 12.79 | 13.77 | 16.09 |
| 2018-06-19 | 12.31 | 13.35 | 12.79 | 13.77 | 15.92 | 16.14 |
| 2019-05-06 | 12.87 | 15.44 | 19.32 | 19.10 | 20.55 | 16.31 |
| 2019-05-13 | 16.04 | 20.55 | 18.06 | 15.29 | 16.31 | 17.50 |
| 2019-08-01 | 16.12 | 17.87 | 17.61 | 20.17 | 16.91 | 21.18 |
| 2019-08-23 | 16.68 | 19.87 | 19.32 | 19.35 | 18.98 | 15.27 |
Source: Yahoo Finance, the authorization of the author
There are all sounds, anger, and warnings
On the day when the tariffs were hit, most returns in most stock markets were much less than other days. And the strength is different, but most markets are important. At the same time, the price of the Ministry of Finance for 10 years has risen on tariff days. High quality bonds worked. However, the overall impact of the types of tariffs used in 2018 and 2019 seems to have been short -lived.
Clients may expect to follow all tariff tweets, but the types of tariffs imposed in 2018 and 2019 are probably not so important for the performance of the capital market. You can get a feeling. However, the wider impact of tariffs may not be so benign.
The author is a registered investment advisor of the Armstrong Advisory Group. The information contained here represents his independent views or research, and does not represent the solicitation, advertising, or research of Armstrong Advisory Group. It is obtained from a reliable source, or its accuracy and completeness are not guaranteed. This is not the purpose of purchasing, selling, or holding securities.
[i] For example, https: //www.cato.org/publications/separating-tariff-tarff-fictions#How-how-how-how-united-UNITED-STATED-SUSED-SUSED-TARIFFS, and HTT. ps: //www.aeaweb.org/articles ? ID = 10.1257/jep.33.4.187
[ii] https://libertyStreeteconomics.newyorkfed.org/2024/12/using-stock-returns-aSGREGATE-EFFECT-EFFECT-EFFECT-EFFECT-some
[iii] Same
[iv] Same
