The Impact of Trump-Era Tariffs on Financial Market Efficiency

TL;DR

This paper investigates how Trump-era tariffs and the COVID-19 pandemic affected financial market efficiency using multifractal analysis, revealing significant shifts especially during COVID-19 and moderate effects from tariffs.

Contribution

It applies multifractal detrended fluctuation analysis to multiple assets to quantify market responses to geopolitical and systemic shocks, highlighting structural shifts in market efficiency.

Findings

COVID-19 caused substantial changes in market dynamics.

Trump tariffs had moderate but observable effects.

VIX showed anti-persistent behavior, indicating rough volatility.

Abstract

This study examines the effects of Trump-era tariffs on financial market efficiency by applying multifractal detrended fluctuation analysis to the return and absolute return time series of six major financial assets: the S\&P 500, SSEC, VIX, BTC/USD, EUR/USD, and Gold. Using the Hurst exponent $h(2)$ and multifractal strength, we assess how market dynamics responded to two major global shocks: the COVID-19 pandemic and the implementation of the Trump tariff policy in 2025. The results show that COVID-19 induced substantial changes in both the Hurst exponent and multifractal strength, particularly for the S\&P 500, BTC/USD, EUR/USD, and Gold. In contrast, the effects of the Trump tariffs were more moderate but still observable across all examined time series. The Chinese market index (SSEC) remained largely unaffected by either event, apart from a distinct response to domestic stimulus measures. In addition, the VIX exhibited anti-persistent behavior with $h(2) < 0.5$, consistent with the rough volatility framework. These findings underscore the usefulness of multifractal analysis in capturing structural shifts in market efficiency under geopolitical and systemic shocks.