Trade Policy Shocks and Corporate Valuations - Disentangling Trade and Uncertainty Channels
IMF Working Papers, April 10, 2026
Source details
- Canonical URL
- Trade Policy Shocks and Corporate Valuations - Disentangling Trade and Uncertainty Channels
Other formats
Bibliographic details
- Authors: Robert C. M. Beyer, Hui Tong, Xinbei Zhou
- Published: April 10, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229042383.001
Key findings
- Firms with greater U.S. trade exposure experienced the sharpest valuation declines following the initial tariff announcement on April 2.
- Firms with higher sensitivity to uncertainty also experienced sharp valuation declines after April 2.
- These same firms showed the strongest rebounds after the announced pause and subsequent trade agreements.
- Both the trade-exposure channel and the sensitivity-to-uncertainty channel are economically meaningful and of similar magnitude.
- Together, the two channels:
- represent about 20 percent of the stock-price decline among tradable firms after April 2, and
- represent about 10 percent of the rebound after trade agreements.
- Trade policy affects firms not only through expected tariff costs, but also by reshaping policy predictability in ways that affect firms’ investment incentives.
Methodology
- Uses a firm-level event-study design to disentangle two channels:
- a trade-exposure channel (direct expected tariff costs), and
- a sensitivity-to-uncertainty channel (changes in policy predictability and resulting uncertainty).
- Analysis focuses on propagation of the 2025 U.S. trade-policy shocks to global equity valuations.
Economic interpretation and magnitude
- Both channels jointly account for a substantial share of the market response to the 2025 shocks.
- The quantified contributions of the channels to market movements:
- about 20 percent of the initial stock-price decline among tradable firms after April 2,
- about 10 percent of the subsequent rebound after trade agreements.
- The patterns imply that uncertainty and trade exposure operated contemporaneously and with similar economic importance in driving firm-level valuation dynamics.
Implications for firms and policy
- Policymakers should consider both direct tariff effects and the uncertainty effects of trade-policy actions when evaluating the economic impact of trade measures.
- Firms’ investment incentives are affected not only by expected tariff costs but also by changes in policy predictability; managing exposure and communicating policy intentions may mitigate valuation volatility.
- Trade agreements and pauses in trade actions can materially reverse valuation losses associated with tariff announcements, reflecting the role of restored predictability.
IMF Working Paper: "Trade Policy Shocks and Corporate Valuations - Disentangling Trade and Uncertainty Channels" (April 10, 2026) by Robert C. M. Beyer, Hui Tong, Xinbei Zhou.
Content in this bundle
- Working Paper