Exchange rates react immediately to the threat of tariffs
[post_content]
Disclaimer: This article has been automatically aggregated from
Exchange rates are more than just abstract numbers. They determine the value of a Mexican peso, the cost of a German car in the U.S. and whether an Argentine farmer can repay his debts. Jantke de Boer, junior professor of international monetary macroeconomics at Ruhr University Bochum, has examined how expectations of future protectionist measures influence exchange rates.
The paper is published in the journal Emerging Markets Review.
“Financial markets do not wait for a political decision to be implemented. They try to anticipate future developments. If it seems more likely that the U.S. will impose higher tariffs in the future, this can immediately be reflected in the exchange rates,” she explains.
Several emerging countries are particularly negatively affected by this; their currencies depreciate more than others. Ruhr University Bochum’s science magazine Rubin provides a detailed article on the findings.
U.S. presidential debates as catalysts
In her studies, de Boer analyzed how announcements of protectionist measures in U.S. presidential debates affect exchange rates. To do so, the economist used live broadcasts of U.S. presidential debates from past years, which were always aired between 9 and 10:30 p.m. (Eastern time). The short time window helps narrow the analysis, but the closure of major stock exchanges does not rule out other market-moving news or alternative explanations for exchange-rate movements..
At the same time, de Boer evaluated data from prediction markets in which people bet on the outcome of the election. “The betting odds show in real time how the assessment of a candidate’s protectionist stance changes during the debate, and at the same time we can see how the foreign exchange market reacts to this,” says de Boer.
Not all countries are equally affected
Countries with close trade relations with the U.S. are especially affected. “The more heavily a country exports to the U.S., the more strongly its currency reacts,” says de Boer. One example: Mexico, which is highly dependent on exports to the U.S., sees the value of the peso fall in response to protectionist announcements. This makes imports from the U.S., such as machinery for the nation’s industry, more expensive.
The study also shows that many emerging countries are more susceptible to such shocks. However, it became clear during de Boer’s analysis that some of these nations are especially vulnerable, and others are much more resistant.
“A liquid financial market such as Brazil’s can better cushion capital outflows, and foreign exchange reserves enable central banks to support their currency,” she explains. De Boer’s research demonstrates how closely economics and policy are intertwined: Protectionist measures may provide benefits in the short term but eventually lead to trade conflicts and higher prices.
More information
Jantke de Boer et al., Protectionist U.S. trade policies and the cross-section of emerging market currency returns, Emerging Markets Review (2026). DOI: 10.1016/j.ememar.2026.101527
Provided by
Ruhr University Bochum
Citation:
Exchange rates react immediately to the threat of tariffs (2026, October 16)
retrieved 16 October 2026
from https://phys.org/news/2026-10-exchange-react-immediately-threat-tariffs.html
This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.
for informational purposes only. We do not claim ownership, accuracy, or liability for the content provided. All rights belong to the original publisher.