Graduation Year

2026

Date of Submission

11-2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Angela Vossmeyer

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Abstract

U.S. tariff policy in 2025 was unprecedented due to a sequence of rapid announcements, impositions, pauses, and partial reversals, creating market-wide shocks. This thesis asks whether U.S. equity markets priced these tariff actions at the industry level and whether the pause and partial reversal days restored the losses from the initial actions. I created a panel of 2025 that combines Fama–French 30 industry daily returns, S&P 500 daily returns, event dummies for major tariff announcements and adjustments, and country-specific announcement indicators for Canada, China, and Mexico. Then, I regress industry returns on the market and these dummies, estimating industry-level abnormal returns on each tariff day. The results show that high import exposure industries, such as household goods, retail, transportation, and oil, recorded large negative abnormal returns (~2.5–6%) when broad tariffs were announced, especially after the April 2nd “Liberation Day”. Many of the same industries saw positive abnormal returns on easing and pause days in May, but these were smaller in magnitude which implies that there was only a partial reversal of the “Liberation Day” shock. Country-specific announcements produced systematic cross-sectional differences: industries reliant on Chinese inputs underperformed on China-focused days, while protected sectors such as steel earned positive abnormal returns when partner-specific tariffs were tightened. Overall, the findings indicate that 2025 tariff policy was priced at the industry level, and that tariff relief did not, on average, return highly exposed industries to their pre-announcement position.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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