Study: what happens next to the stock market after trade war news
Trump has gone nuclear with his trade war. He plans to impose tariffs on $200 billion more of Chinese exports to the U.S.. If China hits back, Trump will impose tariffs on another $200 billion.
China currently exports $478 billion to the U.S. and imports $169 billion from the U.S.. Trump is playing a numbers game: if he hikes tariffs to a total of $450 billion, it will pretty much involve every single Chinese export to the U.S.
But more importantly, China doesn’t export enough goods to the U.S.. They can’t match the U.S.’ tariffs dollar-for-dollar.
Of course China could try to hit the U.S. in other ways, but the reality is that China’s options are limited. The U.S. has the upper hand in a trade dispute because it is a massive net importer.
I compiled a timeline of trade war related news from these 2 sources (here and here). People commonly assume that trade war related news is bad for the stock market. Is it? Let’s take a look at the data.
Here are the S&P 500’s forward returns after a Trump trade war related piece of news came out. See any pattern?