Will the US-China Trade War’s Abnormal Returns From China Have an Effect on the Chinese Economy?

Abstract

This studies objective is to look at China's abnormal return in the event of a tariff war between the US and China. Data categories that are quantitative, or that can be expressed as numbers or ratos, are used in this study and uses utilizes auxiliary data sources in the form of historical data from all countries recorded on the data.worldbank.org website. The kind of data used is annual data series and will be adjusted to the factors affected by the tariff war between America and China. The VAR Analysis Model through the ADF Unit Root Test using the variables GDP, Tariff (TAX), and Exchange Rate (REX) in China from 1990 to 2021 is one of the data analysis strategies utilized in this study. We found that China's GDP is significantly positively to the Chinese exchange rate. Both China's own exchange rate and its tariffs are significantly influenced favorably by China's exchange rate. The tariffs applied by China have a significant negative correlation, which means that the increase in China's tariffs injures China's own economy. However, the rate at which the Chinese currency is exchanged and tariffs in China are significantly positively correlated. The trade war with the USA is not only bad for the global economy but also bad for the Chinese economy. And likely get a detrimental effect into the US economy.