The U.S.-Chinese Trade War: An Event Study of Stock-Market Responses

40 Pages Posted: 17 Dec 2019

See all articles by Peter H. Egger

Peter H. Egger

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Jiaqing Zhu

Guangdong University of Foreign Studies

Date Written: December 2019

Abstract

At the beginning of 2018, President Trump started taking protective tariff measures against products from China in a sequence of events which started a "trade war" between the United States (U.S.) and China. As the value of trade flows affected on both sides rose to a significant amount, this episode will become an interesting research object in the future. A thorough analysis of many outcomes of interest is at this point in time -- and even will be in the next few years -- impossible due to a lack of data which will only become available at a later point. However, as is customary with historical preferential liberalizations in trade agreements and potentially the opposite of it through Brexit, it is possible to gauge consequences of this "trade war" or "trade dispute" when focusing on the stocks of listed companies around related tariff-change announcements or implementations by the U.S. and China in the relevant time span. This paper proposes such an analysis and finds, very much consistent with the rumors from business, that the associated protectionist tariffs appear to have done to a large extent the opposite of what was intended: they hurt domestic firms in targeted and also other, untargeted sectors of an acting country, and they affect third countries and territories which are not even party to the "trade war" or "dispute".

Keywords: event study, Stock market, U.S.-China "trade war"

JEL Classification: F15, F23, G14

Suggested Citation

Egger, Peter H. and Zhu, Jiaqing, The U.S.-Chinese Trade War: An Event Study of Stock-Market Responses (December 2019). CEPR Discussion Paper No. DP14164, Available at SSRN: https://ssrn.com/abstract=3504593

Peter H. Egger (Contact Author)

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )

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Ludwig-Maximilians University of Munich

Schackstr. 4
Munich, 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Poschinger Str. 5
Munich, DE-81679
Germany

Jiaqing Zhu

Guangdong University of Foreign Studies ( email )

Collaborative Innovation Center for Silk Road
Guangzhou, Guangdong
China

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