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Geoeconomic tensions and financial market responses in northeast Asia: Evidence from trade policy uncertainty

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  • Jin, Longyun
  • Xu, Yida
  • Li, Mingyue

Abstract

Trade policy uncertainty poses significant challenges to firm-level stability. Using 2018–2024 panel of listed exporters from China, Japan, and South Korea, this study examines how firms respond to such uncertainty and whether internal financial capacity alters the magnitude of its impact. Notably, corporate performance consistently declines with increasing trade policy uncertainty. However, firms’ stronger financial flexibility reflects greater resilience and plays a buffering role in partially offsetting the negative effects of such uncertainty, which is especially evident in the Chinese market and is characterized by less liberalized financial systems and more critical firm self-sufficiency. This study highlights cross-country variations and the interplay between macroeconomic risks and micro-level financial adaptability, offering actionable insights for firms seeking to navigate external shocks and providing a nuanced understanding of risk management in East Asian capital markets.

Suggested Citation

  • Jin, Longyun & Xu, Yida & Li, Mingyue, 2026. "Geoeconomic tensions and financial market responses in northeast Asia: Evidence from trade policy uncertainty," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026121
    DOI: 10.1016/j.frl.2025.109363
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