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The U.S.-Chinese Trade War: An Event Study of Stock-Market Responses

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  • Egger, Peter
  • Zhu, Jiaqing

Abstract

At the beginning of 2018, President Trump started taking protective tariff measures against products from China in a sequence of events which started a "trade war" between the United States (U.S.) and China. As the value of trade flows affected on both sides rose to a significant amount, this episode will become an interesting research object in the future. A thorough analysis of many outcomes of interest is at this point in time -- and even will be in the next few years -- impossible due to a lack of data which will only become available at a later point. However, as is customary with historical preferential liberalizations in trade agreements and potentially the opposite of it through Brexit, it is possible to gauge consequences of this "trade war" or "trade dispute" when focusing on the stocks of listed companies around related tariff-change announcements or implementations by the U.S. and China in the relevant time span. This paper proposes such an analysis and finds, very much consistent with the rumors from business, that the associated protectionist tariffs appear to have done to a large extent the opposite of what was intended: they hurt domestic firms in targeted and also other, untargeted sectors of an acting country, and they affect third countries and territories which are not even party to the "trade war" or "dispute".

Suggested Citation

  • Egger, Peter & Zhu, Jiaqing, 2019. "The U.S.-Chinese Trade War: An Event Study of Stock-Market Responses," CEPR Discussion Papers 14164, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14164
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    References listed on IDEAS

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    1. Aileen J. Thompson, 1993. "The Anticipated Sectoral Adjustment to the Canada-United States Free Trade Agreement: An Event Study Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 253-271, May.
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    Citations

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    Cited by:

    1. Sascha Tobias Wengerek, 2020. "Share price reactions to tariff imposition announcements in the Trump era - An event study of the trade conflict," Working Papers Dissertations 59, Paderborn University, Faculty of Business Administration and Economics.

    More about this item

    Keywords

    event study; Stock market; U.S.-China trade war;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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