Geopolitical tensions and international political incidents are reshaping the global landscape, with profound effects on international trade and economic stability. Events such as the US-China trade war, Brexit, sanctions linked to the conflict in Ukraine, and US technological restrictions on China highlight the intricate interplay between politics and economics. The return of a Donald Trump administration, with its likely impact on trade policies, underscores the urgency of understanding these dynamics. Despite their significance, the mechanisms driving trade responses to political tensions remain underexplored.
Key questions include: why do some countries impose trade barriers following political incidents, and how do firms and consumers respond beyond formal policies?
Dr. Antonio Navas, in collaboration with Professor Zheng Wang (University of Dundee), aims to address these questions by developing a measure of political tensions between nations. This innovative metric will allow the project to capture both the intensity and timing of tensions, offering a robust foundation for understanding their economic implications. The research will then analyse how these tensions influence bilateral trade flows, separating the direct effects of trade policies such as tariffs and sanctions from more nuanced market responses, including shifts in consumer preferences, supply chain reconfigurations, and firm-level strategies.
Using advanced econometric and theoretical methods and media event data, the project will identify causal relationships and provide a detailed account of the pathways through which political tensions disrupt trade. By uncovering these mechanisms, the research will offer insights for policymakers, enabling them to anticipate and mitigate the economic fallout from geopolitical instability. Businesses, too, can use these findings to develop strategies for managing trade risks, diversifying markets, and strengthening supply chain resilience. Ultimately, the project seeks to inform decision-making in a volatile global environment, fostering stability and resilience in international trade systems.
