Unveiling the Effects of the China-US Trade Conflict: A Comparative Study of Stock Market Behaviors in the United States and China

The world’s economic environment has been significantly impacted by the United States and China’s developing trade conflict. This paper investigates the impact of this trade conflict on the stock markets of both countries, utilizing a decade-long data (2010–2019) of the S&P 500 and Shanghai Composite Index (SSEC), including the period of the trade conflict. The research uses the Augmented Dickey-Fuller (ADF) test to evaluate data stationarity, and an ARIMA model (Autoregressive Integrated Moving Average) to forecast stock market actions. Significant findings of this study indicate differing effects of the conflict on the two nations’ stock markets. The U.S. market, represented by the Nasdaq index, showed short-term fluctuations during the conflict, aligning closely with long-term predictions, which denotes its capacity to adjust and maintain robustness in the face of such economic upheavals. Conversely, China’s market, as per the SSEC, reflected a substantial divergence between actual and predicted values during the trade conflict, suggesting potential long-term economic repercussions. The research is significant as it underscores the divergent impacts of geopolitical events on various national economies. It provides valuable insights for policymakers and investors alike, emphasizing the importance of strategic management and careful evaluation of geopolitical risks and events. The paper suggests that while markets may show resilience in the face of conflicts, the potential for long-term impacts should not be overlooked.