Trade Policy Uncertainty, China-US Trade War and Stock Liquidity in China: The Moderating Role of Digital Transformation

Abstract The China–U.S. trade war sharply increased trade policy uncertainty (TPU), raising concerns about market functioning when policy regimes become unstable. Using a firm-level panel of Chinese A-share listed companies, we examine whether TPU deteriorates stock liquidity. To address endogeneity that limits conventional fixed-effects regressions, we implement a propensity-score–matched (PSM) triple-differences design centered on TPU🞨 TRW🞨Htech. We find that higher TPU during the trade war significantly worsens stock liquidity for high-tech firms and the conclusion is reliable across sever robust test. The effect is concentrated among smaller firms, non–state-owned enterprises, and manufacturing firms. Moreover, the adverse impact is attenuated for firms with greater digital transformation. Our findings provide credible evidence on how TPU translates into tighter trading conditions and offer policy and managerial implications for strengthening market resilience to external shocks.