Trump’s tariffs: Unpacking the EU’s market reaction

• Trump’s 2025 tariff announcement significantly reduced abnormal and cumulative returns for EU STOXX 600 firms. • IT, materials, and energy sectors exhibited the strongest negative returns, while healthcare and communications remained resilient. • Smaller firms suffered greater declines, reflecting their limited diversification and higher trade exposure compared to larger multinationals. • EU equity markets’ vulnerability to U.S. trade policy shocks. This paper explores the effect of 26 February 2025 Trumps’ tariffs announcement against Europe. As a mean of event-study analysis, we find that the announcement led to a reduction of firms’ abnormal return (AR), raw return and cumulative abnormal return (CAR) listed on the EU STOXX 600, and that its effect changes according to firms’ operating industry and size. Our results confirm the EU market dependence from US policies, warning about its vulnerability.