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Trade Protection, Stock-Market Returns, and Welfare

Author

Listed:
  • Mary Amiti
  • Matthieu Gomez
  • Sang Hoon Kong
  • David Weinstein

Abstract

Tariff announcements during the U.S.-China trade war had large and broad effects on financial variables: stock prices fell, yields declined, and risk premia rose. The stock-price reactions were heterogeneous in the cross-section during 2018–19—firms that imported from, exported to, or sold in China experienced significantly worse returns than other firms. These cross-sectional differences in announcement-day returns forecast subsequent declines in profits, sales, employment, and investment. Using a specific factors model, we show that these asset price movements can help identify the welfare impact of tariffs. We estimate that the trade war substantially reduced U.S. welfare.

Suggested Citation

  • Mary Amiti & Matthieu Gomez & Sang Hoon Kong & David Weinstein, 2021. "Trade Protection, Stock-Market Returns, and Welfare," NBER Working Papers 28758, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28758
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    Cited by:

    1. Carter, Colin A. & Steinbach, Sandro & Zhuang, Xiting, 2022. "Global Shipping Container Disruptions and U.S. Agricultural Exports," Working Papers 320397, International Agricultural Trade Research Consortium.
    2. Huang, Yi & Lin, Chen & Liu, Sibo & Tang, Heiwai, 2023. "Trade networks and firm value: Evidence from the U.S.-China trade war," Journal of International Economics, Elsevier, vol. 145(C).
    3. Alan Feng & Haishi Li & Yulin Wang, 2023. "We Are All in the Same Boat: Cross-Border Spillovers of Climate Shocks through International Trade and Supply Chain," CESifo Working Paper Series 10402, CESifo.
    4. Benguria, Felipe & Choi, Jaerim & Swenson, Deborah L. & Xu, Mingzhi (Jimmy), 2022. "Anxiety or pain? The impact of tariffs and uncertainty on Chinese firms in the trade war," Journal of International Economics, Elsevier, vol. 137(C).
    5. Carlomagno, Guillermo & Albagli, Elías, 2022. "Trade wars and asset prices," Journal of International Money and Finance, Elsevier, vol. 124(C).
    6. Kaczmarek, Tomasz & Demir, Ender & Rouatbi, Wael & Zaremba, Adam, 2025. "Tariff exposure and sectoral vulnerability: Evidence from equity market responses to the 2025 U.S. trade shock," Research in International Business and Finance, Elsevier, vol. 77(PB).
    7. Carter, Colin A. & Steinbach, Sandro & Zhuang, Xiting, 2022. "Global Container Trade Disruptions and U.S. Agricultural Exports," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322364, Agricultural and Applied Economics Association.
    8. Shen, Haomin & Gao, Yuan & Cheng, Xiaoke & Wang, Qi, 2024. "The impact of the U.S. export controls on Chinese firms' innovation: Evidence from Chinese high-tech firms," International Review of Financial Analysis, Elsevier, vol. 95(PC).
    9. Bai, Ruxue & Li, Ying & Liu, Zhengwen & Yin, Libo, 2025. "Globalization, product specialization, and firm value," Finance Research Letters, Elsevier, vol. 80(C).
    10. Dmitry Matveev & Francisco Ruge-Murcia, 2024. "Tariffs and the Exchange Rate: Evidence from Twitter," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1185-1211, September.
    11. Xinming Du & Lei Li, 2025. "When Growth Stumbles, Pollute? Trade War, Environmental Enforcement, and Pollution," CRC TR 224 Discussion Paper Series crctr224_2025_658, University of Bonn and University of Mannheim, Germany.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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