How are Trade Policies Affecting Stock Prices of US Multinational Corporations? Evidence from the US-China Trade Dispute.

This project studies the US-China trade war consequences in the financial market. Specifically, it evaluates the impact of the trade frictions on US multinational corporation (MNC) stock prices and examines the differentials between corporations that produce tradable goods and corporations that provide services. The Chinese government has been depreciating its currency as a retaliation measure against the continuously rising tariff rates set by the United States. Rather than tariff rates, which has been used in previous literature, this paper uses the China-US exchange rate as a measure of trade frictions. I find that on average, stock prices of US MNCs that produce tradable goods are affected negatively by the devaluating Chinese Yuan. This correlation is especially prominent for MNCs in the automotive and machinery industry.