Navigating Trade Policy Shocks: The Stabilizing Effect of Tariff Policy on Global Utilities' Market Reactions

Abstract

This study investigates how global stock markets respond to the announcement of tariff postponement on April 9, 2025, with a particular focus on the utilities sector. Using a sample of 367 utilities firms across 44 countries, the study employs an event study approach to examine cumulative abnormal returns (CARs) over pre‐event, event, and post‐event windows. The analysis further explores heterogeneity across markets, industries, firm size, growth opportunities, tariff exposure, and trade intensity, as well as differences in CARs across these dimensions. The results show that global utilities stocks experience significantly negative CARs during the pre‐event and event windows, reflecting heightened uncertainty and anticipated cost pressures associated with tariff policies. However, the postponement announcement triggers a strong and significant reversal, with positive CARs observed in the post‐event period. This pattern is consistently observed across markets, industries, and firm characteristics, although the magnitude of reactions varies. Differences in CARs are most pronounced in the pre‐event and event periods but tend to diminish after the announcement, indicating convergence in market responses. Overall, the findings highlight the stabilizing role of tariff postponement in reducing uncertainty and shaping investor expectations in global financial markets.