External Shock and Industry Resilience: The Contagion Effect of Trump Retaliation Tariff in the Indonesian Stock Exchange

Abstrak

This study examines the sectoral sensitivity of Indonesia's equity market to tariff shocks during the Trump administration's protectionist trade agenda. Utilizing an event study centered on the reciprocal tariff announcement on April 8, 2025, we analyze the cumulative abnormal returns (CAR) of eleven sectoral indices on the Indonesia Stock Exchange (IDX) using daily data and a mean-adjusted model. We assess immediate impact, short-term recovery, and cross-sectoral variation using one-sample t-tests. As a result of increased exposure to global value chains and investor uncertainty, the Technology sector saw the most significant decline on the event date (CAR = -11.79%), followed by Basic Materials and Consumer Cyclicals. Technology stayed in negative territory until day 18 (t+17), while most sectors recovered within two to five trading days. On the other hand, the Basic Materials, Energy, infrastructure, transport, non-cyclical, and cyclical sectors bounced back quickly, reaching positive CAR in two days, probably helped by expectations of commodity resilience and supply chain substitution. These findings suggest that US tariff shocks transmit to emerging markets like Indonesia through trade-expectation channels, disproportionately affecting sectors reliant on imported inputs and external demand.