Natixis: Big data analysis of US-China trade war

Businesses in Asia are starting to downplay the fears of the trade war. That’s what came out of Natixis’ latest Global Economic Research last week.

With a big data focus, the report titled ‘Natixis big data analysis of trade war: the irony of receding fears as trade actions escalate’ found the following:

  • 2018 has surprised the world with a radical turn to protectionism. After a half-century support for the multilateral trade system, the US has turned its back on the existing rules to reap more benefit for domestic competition.
  • As we argued in our earlier note, the direct impact of the trade war through the export/import channel will be limited. But, the trade war has many other channels to affect the economy, such as investors’ confidence and its impact on investment. Given the importance that confidence plays in measuring the impact of the trade world on markets and the economy, we present a Natixis sentiment measure of the trade war, based on big data analysis of media across Asia.
  • We then calculate such estimate of trade war sentiment for the different periods in which key tariff announcements were made either by the US or China, and compare it with key forward looking indicators of business confidence, namely the Purchasing Managers Index, and stock prices for major countries in the Asian Pacific region.
  • Given the harshening of the trade measures taken by the US since July, we were expecting a clear deterioration on the media’s sentiment on the trade war as well as on business confidence and stock market performance. However, we do not see a consistently wide spread deterioration in confidence since July, either through our own measure of sentiment based on media or business confidence or stock market performance. If anything, there is even a recovery in some cases.
  • All in all, our big data analysis seems to indicate that businesses are starting to downplay the fears of the trade war. This should be good news for the Asian stocks down the road. But let’s not forget that this is only true if no more action is taken from either side. Unfortunately, though, a further escalation of the US-China trade war is increasingly likely.

Read the report in full here.

Useful links

China Natixis: ASEAN Corporate Monitor 2018