Bilateral Conflict Risk and Trade: Military Wars, Trade Wars, and Diplomatic Noise /
How damaging is a "trade war" compared to a "military war" or a "war of words"? Aggregate conflict indicators cannot say, because they treat missile strikes, sanctions, and diplomatic protests as equivalent. We build a monthly bilateral indicator from GDELT event data,...
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- Englisch
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Cambridge, Mass.
National Bureau of Economic Research
2026.
- Zusammenfassung:
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How damaging is a "trade war" compared to a "military war" or a "war of words"? Aggregate conflict indicators cannot say, because they treat missile strikes, sanctions, and diplomatic protests as equivalent. We build a monthly bilateral indicator from GDELT event data, calibrated against human-curated ground truth, that decomposes hostility into four layers: kinetic fighting ("military war"), military posture, sanctions-context tensions ("trade war"), and routine diplomacy. The decomposed panel reveals a secular shift: over the past decade, governments have steadily substituted economic coercion for military confrontation, nearly doubling the trade-weighted share of hostility channelled through sanctions contexts. In a gravity trade model, the aggregate indicator is negative, large, and statistically significant, but the decomposition reveals that only two layers drive the result. Kinetic conflict and trade-context hostility are both economically large and precisely estimated; routine diplomacy, despite dominating measured hostility, has no trade effect at all. The directed structure uncovers a retaliation channel that compounds trade losses over several months. Our measure remains a significant determinant of bilateral trade in a horse race against the closest existing alternative. Relative to a pre-escalation baseline, the geopolitical deterioration of the past decade has put roughly $334 billion of bilateral trade at risk, with the US-China pair accounting for half.
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- 1 online resource: illustrations (black and white);
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- April 2026.
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