US-China trade war and China’s stock market: an event-driven analysis

Abstract

The US-China trade war, initiated in March 2018, substantially transformed the trading partnership between the two largest economic powers. It directly influenced the profitability of domestic enterprises related to the export chain and harmed the domestic economy in China and its stock market. This study empirically examines the effects of the trade war on China’s stock market based on chronological events and tests whether it is the contagion effect or the present value effect. The empirical study supports the contagion effect because the impact of the US-China trade war differed significantly in different sectors only when the US announced its imposition of more tariffs on US$50 billion worth of Chinese products. However, there is no apparent difference between the industries for other events, nor is there any significant difference between the industries in terms of long-term impact.