The Impact of Geopolitical Risk on Bilateral Trade: Evidence from Services Trade

This study uses bilateral services trade data from 43 countries to examine how geopolitical risk (GPR) affects services exports. Results show that rising GPR in exporting countries significantly reduces services exports, particularly in product-related, transport and tourism services. Conversely, higher GPR in importing countries boosts services exports from exporting countries, especially in product-related and transport services. Further analysis reveals that free trade agreements (FTAs) help mitigate this negative impact. These findings offer empirical evidence for governments to formulate trade policies and FTA negotiation strategies in high-risk environments.