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The Economic Impact of US-China Tensions

Author

Listed:
  • Silvo Dajčman

    (University of Maribor, Faculty of Economics and Business)

  • Dejan Romih

    (University of Maribor, Faculty of Economics and Business)

  • Valentin Toader

    (Babeș-Bolyai University, Faculty of Business)

Abstract

In this paper, we analyse the impact of a sudden and unexpected increase in US-China tensions on the US and Chinese economies using vector autoregression. We find that a positive shock in US-China tensions has a negative impact on both economies, although there are certain differences between them due to the characteristics of their economies and their ability to adapt to change. The findings indicate that a sudden and unforeseen rise in geopolitical frictions negatively influences industrial output and stock market performance in each country. However, the impact on exports presents a different picture—China appears to have greater flexibility in diversifying its global trade partnerships. The results of the study have policy implications as they emphasise the need to strengthen the resilience of both the US and Chinese economies to geopolitical shocks. This also applies to other economies.

Suggested Citation

  • Silvo Dajčman & Dejan Romih & Valentin Toader, 2026. "The Economic Impact of US-China Tensions," Springer Proceedings in Business and Economics,, Springer.
    • Handle: RePEc:spr:prbchp:978-3-032-11639-0_2
    DOI: 10.1007/978-3-032-11639-0_2
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