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The Impact of Trade Wars on the USA and China in Financial Economics

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  • P. Sudarshan

Abstract

Purpose: This paper examines the evolving impact of trade wars on the United States and China in financial economics from its onset in 2018 through to the present. Design/Methodology/Approach: By integrating theoretical frameworks with empirical evidence, this study underscores the lasting influence of geopolitical trade tensions on financial decision-making, investment behavior, and global economic policy. Findings: The analysis highlights how these tensions affected bilateral trade volumes, increased market volatility, influenced currency valuations, and prompted shifts in monetary policy. In the United States, industries such as agriculture and technology encountered heightened costs and reduced export demand, while China experienced a slowdown in export-driven growth and increased pressure to stimulate domestic consumption and innovate independently. Financial markets in both countries responded with volatility, risk reallocation, and capital flow adjustments. Practical Implications: The trade war also catalyzed long-term structural changes, including supply chain diversification and a move toward strategic decoupling in sectors such as technology and finance. Originality value: The conflict, marked by reciprocal tariff impositions, investment restrictions, and regulatory actions, has significantly disrupted global trade dynamics and financial markets.

Suggested Citation

  • P. Sudarshan, 2025. "The Impact of Trade Wars on the USA and China in Financial Economics," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 171-184.
    • Handle: RePEc:ers:ijebaa:v:xiii:y:2025:i:2:p:171-184
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    References listed on IDEAS

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    1. Chad P. Bown, 2021. "The US–China trade war and phase one agreement," Working Paper Series WP21-2, Peterson Institute for International Economics.
    2. Bown, Chad P., 2021. "The US–China trade war and Phase One agreement," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 805-843.
    3. Mary Amiti & Stephen J. Redding & David E. Weinstein, 2019. "The impact of the 2018 trade war on US prices and welfare," CentrePiece - The magazine for economic performance 553, Centre for Economic Performance, LSE.
    4. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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