Trade Protection, Stock-Market Returns, and Welfare
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.
-
-
Copy CitationMary Amiti, Matthieu Gomez, Sang Hoon Kong, and David Weinstein, "Trade Protection, Stock-Market Returns, and Welfare," NBER Working Paper 28758 (2021), https://doi.org/10.3386/w28758.Download Citation
-
-
Related
Topics
Programs
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
