Abstract
This study examines how US-China geopolitical tensions influence economic growth in major developed economies (the United States, Germany and Japan) and emerging economies (China, India, Brazil and South Africa), with a focus on how these effects differ across the business cycle and over short-, medium- and long-run horizons. Addressing limitations in prior research that emphasises average, linear impacts, the analysis centres on asymmetric and state-dependent dynamics. Using quarterly data from 1997Q1 to 2023Q4, it applies an integrated QARDL - QCOH framework to assess how tensions, measured through the UCT Index, affect growth across quantiles and frequencies while controlling for key endogenous growth drivers.
The empirical findings reveal that US-China tensions exert significant but heterogeneous effects across countries, growth regimes and time horizons. In developed economies, Germany and Japan display persistent long-run vulnerability, while the US is most affected during low-growth periods. China and India demonstrate resilience in normal and high-growth states, consistent with evidence of policy-driven structural upgrading, whereas Brazil and South Africa face pronounced downside risks during downturns. Across most countries, short-run effects are modest and often lagged, indicating that geopolitical shocks primarily transmit through gradual trade, investment and uncertainty channels rather than immediate output disruptions. The QCOH results further show that these impacts intensify at medium- and long-run frequencies, underscoring the structural and slow-moving nature of geopolitical spillovers.
Overall, the study shows that US-China tensions influence economic growth in nonlinear, state-dependent and frequency-specific ways, offering insights beyond traditional mean-based analyses. The findings underline the need for stronger innovation capacity, greater diversification of trade and investment linkages, and effective counter-cyclical policies to reduce vulnerability to geopolitical shocks. Future work could build on these results by examining sector-level transmission,...