July 29, 2025

US’s Trade Wars and Their Impact on Global Equity Markets: A GARCH Approach

ISImran Hussain ShahUniversity of Lahore

Key Points

The study finds that U.S. trade war announcements significantly affect global equity markets' volatility.
Using a GARCH(1,1) model, the analysis shows concentrated volatility during key policy announcement periods.
Stock market returns from the U.S., China, and Europe demonstrate differential impacts based on emerging market characteristics.
The findings suggest that trade-related tweets and policies create measurable ripple effects across global markets.

Abstract

Abstract This paper investigates the impact of U.S. trade war announcements under the Trump administration on global equity market volatility. Using a GARCH(1,1) model, the study analyzes stock market returns from the U.S. (S&P 500), China (SSE Composite), and Europe (Euro Stoxx 50) over key policy announcement periods from 2017–2020. The results indicate significant volatility clustering and asymmetrical market reactions to tariff threats, especially in emerging markets and export-driven economies. Findings reveal that Trump's trade tweets and formal policy implementations produced measurable volatility, with global spillover effects.

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