Trade Imbalances and the Rise of Protectionism

Philippe Martin, Samuel Delpeuch and Etienne Fize

No 15742, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate the role of trade imbalances in the rise of protectionism in the past 10 years. Bilateral as well as multilateral trade imbalances are robust predictors of protectionist attacks. This result is partly but not entirely driven by the US and the Trump years. We also find that countries that experience a bilateral real exchange rate appreciation launch more protectionist attacks. The role of trade imbalances in the rise of protectionism is confirmed when we use fiscal policies as instrumental variables for trade imbalances. Countries with more expansionary fiscal policies react to the ensuing trade imbalance by a more protectionist trade policy. The role of trade imbalances in the rise of protectionism is quantitatively important: in the G20, a one standard deviation increase in the bilateral and multilateral trade deficits of a country leads respectively to a 7% and 17% rise of protectionist attacks by this country.

Keywords: Trade imbalances; Protectionism (search for similar items in EconPapers)
JEL-codes: F13 F14 F41 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-cwa, nep-int and nep-opm
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Citations: View citations in EconPapers (3)

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