Stock reactions to China tweets: Trump and the US-China trade war

Abstract

The aim of this paper is to examine what effect Donald Trump’s tweets concerning the US-China trade war have on the US Stock Market, and hereby exploring a topic which to our knowledge has not been investigated previously. Specifically, the analysis is broken down in two parts: first, it looks at whether his tweets cause market movements and secondly it determines whether movements correlate with the sentiment of the tweet. Our results show that Trump’s tweets regarding President Xi increases market returns and decreases volatility. Moreover, tweets regarding trade, tariffs, imports, or exports decrease market returns. Finally, the sentiment of Trump’s tweets is also relevant in this context; positive tweets about President Xi correlates to increases in the market return.