Do words hurt more than actions? The impact of trade tensions on financial markets

We use machine learning techniques to quantify trade tensions between US and China. Our measure matches well-known events in the US-China dispute is exogenous developments on global financial markets. Local projections show that rising leave markets largely unaffected, except for firms are more exposed China, while negatively impacting stock market indices exchange rates China EMEs. complement these findings with additional evidence suggesting have been interpreted as a negative demand shock Chinese economy rather than risk shock.