When Washington Sneezes, the Nordics Catch a Cold : Capital Market Reactions to Liberation Day Tariffs

Sammanfattning

This study examines the stock price reactions for Nordic publicly listed firms to the U.S. "Liberation Day" tariff announcement on April 2, 2025, contributing to the literature on trade policy uncertainty in small open economies. Applying an event study methodology combined with cross-sectional regression analysis, we analyse 734 publicly listed firms across Denmark, Finland, Norway and Sweden. Abnormal returns are estimated using the market model, with significance assessed through the Kolari and Pynnönen (2010) adjusted standardised cross-sectional test. The empirical results show that Nordic publicly listed firms experience significant negative cumulative abnormal returns. Subsample analyses reveal considerable heterogeneity across sectors and firm size quartiles, with Industrials, Materials and Financials among the most severely affected sectors. Regression results indicate that leverage and sector affiliation are significant determinants of the cross-sectional variation in abnormal returns, while firm size and R&D intensity do not remain statistically significant once sector and country effects are controlled for. Overall, the findings highlight that the effects of tariff-related policy shocks are unevenly distributed across firms and sectors and emphasise the importance of trade exposure and sector composition in shaping market reactions within small open economies.