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State-Dependent Asset Pricing under Trade Policy Uncertainty: Evidence from China and the U.S

In: Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025)

Author

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  • Weiqi Lin

    (Jinan University, Finance)

Abstract

In the context of rising geopolitical tensions and intensified China–U.S. trade frictions, trade policy uncertainty (TPU) has emerged as a critical driver of global market fluctuations. This paper investigates how TPU affects asset pricing mechanisms in China and the U.S. Based on monthly financial and policy data from 2015 to 2025, we construct a state-dependent analytical framework combining Diebold–Yilmaz spillover indices, Markov regime-switching models, and rolling Fama–French factor regressions. Results show that TPU significantly reshapes market structure by altering volatility regimes, factor exposures, and model explanatory power (R2). Notably, the transmission paths differ across countries: value factors dominate in China, while size factors are more prominent in the U.S. These findings offer insights into cross-market risk spillovers and the structural implications of policy uncertainty on pricing efficiency.

Suggested Citation

  • Weiqi Lin, 2025. "State-Dependent Asset Pricing under Trade Policy Uncertainty: Evidence from China and the U.S," Advances in Economics, Business and Management Research, in: Barbara Siuta-Tokarska & Adriana Grigorescu & Md. Mamun Habib & Yifeng Zhu (ed.), Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025), pages 967-974, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-835-6_104
    DOI: 10.2991/978-94-6463-835-6_104
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