Trade War has been a subject of debate for the researchers on many fronts be it political or economic. The issues between the two countries (USA and China) has reemerged on the surface repeatedly. It has an impact on the economies of the two countries but across the globe as well. Research studies take this issue as an event or try to capture it through news announcements as and when any dispute occurs, thus focusing on the short-term effects of it and to test its impact on the financial markets particularly stock, currency and bitcoin. Therefore, the aim of this research is to propose a conceptual framework to create a composite variable by identifying its most suitable proxies from the literature and to treat it as a variable. Secondly, it aims to study both perspectives. The composition of variable with all the data obtained for US and for China separately. Two composites one where all the proxies are used for china and other where all proxies were used with data specifically for US are created. Principal component analysis is used to create the composite variable and Time series data analysis is used to investigate the impact of trade war on the financial markets.