Heterogeneous Equity Market Responses to a Geopolitical Tariff Threat

This paper examines country-specific equity market responses to a politically conditioned tariff threat using the synthetic control method. The analysis focuses on the January 17, 2026 announcement in which the U.S. administration threatened escalating tariffs on imports from eight NATO countries unless an unrelated geopolitical demand-the purchase of Greenlandwas met. The policy was unusual in that tariffs were explicitly tied to a non-trade objective and selectively applied to close political and military allies of the United States. Using daily national equity market indices, the analysis reveals substantial heterogeneity in market responses to the same policy shock. All targeted countries exhibit negative post-announcement deviations from their synthetic benchmarks, except the United Kingdom.