Trade uncertainty: Impacts of Trump tariff risk on technology and energy stock markets

Abstract

This paper investigates how global technology and energy markets are exposed to tariff risks during the Trump first and second term presidency in the context of international trade uncertainty. Using the multivariable simultaneous quantile regression and data from January 1, 2017 to May 30, 2025, the paper examines daily and monthly responses of technology and energy stock markets to tariff risks using the US Trade Policy Uncertainty Index (TPU_US) and World Trade Uncertainty Index (WTUI). The sample covers the global market, Australia, Canada, China, France, India, Japan, Sweden, Taiwan, the United Kingdom (UK), and the United States (US). The results indicate that trade risk exerts significant daily impacts on both technology and energy markets, with its varying effects across different market conditions. Specifically, in most markets, the impact transitions are from negative in lower quantiles reflecting bearish or unstable market conditions to positive in higher quantiles, associated with bullish market phases. This pattern suggests that, during economic downturns, US trade policy uncertainty increases perceived risk and depresses returns in both technology and energy sectors. However, under favourable market conditions, such uncertainty may create opportunities for certain assets within these sectors to serve as effective hedges, potentially enhancing their attractiveness to investors during bull markets. This study timely contributes to the literature on the asymmetric effects of tariff risks on technology and energy stock markets at the global and national levels. Our findings offer practical implications for policy makers and investment practitioners that investing in technology and energy sectors can hedge against trade policy risks under bullish market conditions.