The Persistent Effects of US-China Tension on Stock Market Dynamics

Political and economic conflicts between countries directly affect national economies and financial markets. These effects are not limited to the countries involved in the conflict, but also spread to other countries through trade relations and capital flows. The severity of the effects increases, especially when conflicts occur between dominant countries. In this context, the study aims to determine the effects of the recent conflict between the USA and China on the return and volatility of stock markets and whether these effects have a permanent structure or not. The study also aims to evaluate these effects within the framework of key economic transmission channels such as financial contagion, trade linkages, and portfolio flows. For this purpose, the relationships between the US-China tension index and the stock market returns and volatility of G7 countries and 23 developing countries were analyzed using Pata and Yilanci (2020) Fractional Frequency Flexible Fourier Form Toda & Yamamoto causality test. The most important finding of the study is that the effects of the US-China tension on markets are not homogeneous, but are closely related to the development level, geographical location and economic fragility of the countries. This heterogeneous structure is believed to stem from the fact that these economic transmission channels operate with different intensities and mechanisms between countries. Another important finding of the study is that US-China tension is more related with risk in developed markets, and with pricing and risk perception simultaneously in emerging markets. Moreover, the persistency of the effects in all markets where causal relationships exist indicates that the US-China tension is a source of structural uncertainty in the global financial system. The study contributes significantly to the literature by revealing the persistent effects of US-China tensions on financial markets and provides empirical evidence that investors and policymakers should consider in risk management.

Cite this article as: Kamışlı, M. (2026). ABD-Çin geriliminin hisse senedi piyasa dinamikleri üzerindeki kalıcı etkileri. Journal of Business Administration and Social Studies, 10, 0047, doi: 10.5152/JBASS.2026.25047.