The Trump Tariff Era and its Transmission to Emerging Economies: Empirical Insights from Indonesia's Shariah Stock Index

ABSTRACT: Purpose: This study examines the transmission of trade policy shocks from the Trump tariff era to Indonesia’s Islamic capital market, focusing on the Indonesia Sharia Stock Index (ISSI), Jakarta Islamic Index 70 (JI70), and Jakarta Islamic Index (JII). Materials and Methods: Using daily data from April to September, the study applies return analysis, abnormal return estimation, and cumulative abnormal return (CAR) calculations to assess the market response to U.S.–China trade tensions. Results: Findings show that Islamic indices generally move in line with the broader IDX Composite, though trade tensions increased volatility and caused short-term fluctuations, particularly in June and August. ISSI displayed significant abnormal returns compared to the composite index, suggesting greater sensitivity to global trade shocks. Despite this volatility, all indices recorded positive CAR values—ISSI (0.1250), JI70 (0.1099), and JII (0.0909)—indicating sustained medium-term resilience. Conclusion: Indonesia’s Shariah-compliant equity market is affected by international trade policies but remains stable and competitive. These findings highlight the resilience of Islamic indices in emerging markets and provide insights for policymakers and investors on diversification and strengthening Islamic capital market performance.