The Impact of Trump-Era Tariffs on Financial Market Efficiency

Paper: arXiv 2602.00548

Authors: Tetsuya Takaishi

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.

Complexity vs Empirical Score

• Math Complexity: 5.5/10
• Empirical Rigor: 6.0/10
• Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper applies standard Multifractal Detrended Fluctuation Analysis (MFDFA) to assess structural shifts in market efficiency caused by geopolitical shocks like Trump-era tariffs. While the mathematical framework is established and well-explained, the empirical focus relies mostly on rolling-window Hurst exponents without extensive statistical hypothesis testing or out-of-sample trading backtests.

Research Flowchart

  flowchart TD
    A[Research Goal: Assess Impact of Shocks on Financial Market Efficiency] --> B[Data Inputs: S&P 500, SSEC, VIX, BTC/USD, EUR/USD, Gold]
    B --> C[Methodology: Multifractal Detrended Fluctuation Analysis - MF-DFA]
    C --> D[Compute Metrics: Hurst Exponent h2 & Multifractal Strength]
    D --> E[Evaluate Events: COVID-19 vs 2025 Trump Tariffs]
    E --> F[Findings: COVID-19 Caused Major Shifts; Tariffs Showed Moderate Impact]
    E --> G[Findings: SSEC Driven by Domestic Stimulus; VIX Displays Rough Volatility]