We study the multifaceted effects of trade policy shocks on financial markets using a structural vector autoregression identified via event day heteroskedasticity. We find that restrictive US trade policy shocks affect US and international stock prices heterogeneously, but generally negatively. They increase market uncertainty, lower US interest rates, and lead to an appreciation of the US dollar. ...
Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin), comments on the results of today’s meeting of the European Central Bank (ECB):