Understanding the Impact of Trade War Between the US and China on Oil Price Volatility

Abstract

The aim of the study is to evaluate role of trade war between the United States and China on oil price. For this purpose, global oil price and US trade balance with China are selected as variables. In addition to this issue, monthly data of these variables for the periods between 1990 and 2019 are taken into consideration. In the evaluation process, both Engle–Granger cointegration and Toda–Yamamoto causality analysis are considered. The results of Engle–Granger cointegration analysis indicates that there is a ­relationship between trade war and oil prices. Nevertheless, according to the results of Toda–Yamamoto causality analysis, it is identified that trade war does not cause oil prices. While looking at these results, it is determined that trade war between the United States and China has an influence on the oil price changes. However, it is also understood that it is not the main factor of this volatility. Thus, it is recommended that in order to identify the main indicator of the oil price volatility, some different factors should also be taken into consideration.

Citation

Dinçer, H., Yüksel, S. and Uluer, G.S. (2021), "Understanding the Impact of Trade War Between the US and China on Oil Price Volatility", Das, R.C. (Ed.) Global Tariff War: Economic, Political and Social Implications, Emerald Publishing Limited, Leeds, pp. 161-171. https://doi.org/10.1108/978-1-80071-314-720211013