Date of Award

Spring 6-4-2026

Document Type

Thesis (Undergraduate)

Department

Economics

First Advisor

Bruce Sacerdote

Abstract

On April 2, 2025, President Donald Trump announced a series of reciprocal tariffs on U.S. trading partners, set to be implemented on April 9, 2025, a day he referred to as “Liberation Day”. Although these tariffs were paused almost immediately, they were subsequently renegotiated and revised throughout the summer of 2025. This paper finds evidence that Liberation Day caused a spike in uncertainty among firms and a spike in volatility among investors, while the subsequent summer revisions reduced uncertainty and volatility, despite tariff levels remaining substantially higher than those at the start of the year. These findings suggest that firms and investors anchored their expectations to the tariff rates initially threatened on Liberation Day, rather than to the pre-2025 levels. Further, the paper finds evidence that firms with greater export exposure experienced larger changes in uncertainty relative to less export-exposed firms. However, at the investor level, there is little evidence uncertainty responses were differentiated by firms’ trade exposure.

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