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Does the wolf come again? The disappeared effect of trade war news on China’s stocks (2018 vs 2025)

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  • Li, Yabo
  • Zhang, Zhen
  • Yin, Lei

Abstract

This study investigates how global media sentiment regarding trade war influenced China’s stock market performance, highlighting a structural decoupling between the 2018 and 2025 episodes. Our results demonstrate a statistically significant positive relationship between global media sentiment and China’s stock market in 2018, but this effect disappeared in 2025. This reversal is attributed to a change in the investor mood, with negative news dampening investor mood in 2018 yet boosting it in 2025. As the conflict evolved from a 2018 bilateral dispute into a 2025 global standoff with China cast as a stability anchor, investors began treating the trade war as a worldwide risk rather than a China-specific threat. Firm-level reactions mirror this shift. In 2018, abnormal returns varied directly with industry exposure to the Section 301 list, but by 2025 that link disappeared. More interestingly, firms that suffered during the 2018 episode now exhibit the opposite pattern: negative media sentiment correlates with better stock performance.

Suggested Citation

  • Li, Yabo & Zhang, Zhen & Yin, Lei, 2026. "Does the wolf come again? The disappeared effect of trade war news on China’s stocks (2018 vs 2025)," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026649
    DOI: 10.1016/j.frl.2025.109415
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