Disruptions to Foreign Trade and U.S. Banks’ Returns

Ferreira, Thiago Revil T.; Modugno, Michele; Palazzo, Berardino; Ramírez, Carlos

doi:10.17016/FEDS.2026.013

Working Paper

Disruptions to Foreign Trade and U.S. Banks’ Returns

Abstract: We develop a market-based measure of firms' and industries' exposure to foreign trade disruptions. Combining this approach with detailed supervisory data, we quantify large U.S. banks' exposure to such disruptions and propose a novel bank-level vulnerability index. We show that banks with greater exposure experienced significantly larger stock price declines following the April 2025 tariff announcements. Our vulnerability index explains 18% of the cross-sectional variation in bank returns during this episode.

JEL Classification: F13; G21;

https://doi.org/10.17016/FEDS.2026.013