Protecting or Hurting? A Critical Event Study of Two Major Protectionist Trade Policies Under Trump
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2025-07-04
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en
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This study investigates the protectionist trade policies of the Trump administration during its first term by critically examining two key measures through which Donald Trump sought to “make America great again”: the imposition of tariffs on aluminium and steel, and the renegotiation of the North American Free Trade Agreement (NAFTA), aimed at protecting the U.S. automotive industry. It examines whether these policies were perceived as protective by the targeted industries by analyzing their market responses using an event study methodology based on the Market Model, a widely used approach in financial economics for estimating abnormal stock returns around key policy events. Drawing on insights from existing literature, the study hypothesizes that such protectionist actions would elicit a positive response from investors in the affected sectors. Contrary to expectations, the findings reveal a predominantly negative market sentiment within the industries targeted for protection surrounding major policy dates. The study finds that elevated uncertainty, particularly regarding regulatory details, communication, and subsequent policy steps, played a significant role in shaping investor responses. Moreover, the broader economic drawbacks of protectionist measures may have further contributed to the negative market reaction.
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Faculteit der Managementwetenschappen