A wave of protectionism?

This has resulted in high Chinese current account surpluses and high Chinese growth, but a policy of export-led growth is not without risk to both the surplus and the deficit countries: risks to the surplus economy include rising inflationary pressures or difficulties to sterilize the increase of foreign reserves to maintain the undervalued currency; risks to the trade deficit country include the [...] Lastly, both the change to the U. S. economic outlook and the (real) U. S. exchange rate are important transmission mechanisms of the tariff shock to the rest of the world. [...] As the simulation results in the next section show, the decision how to use the revenues affects the results for the country levying the tariff, but hardly changes transmission of the shock to the rest of the world. [...] Although the cost of Emerging Asia’s goods to the United States goes down, the (average) price of an imported good for the U. S. consumer has gone up, because of the tariff. [...] Also, tariffs have a positive effect on the U. S. trade balance (the trade balance improves up to 0.3 percentage point in the short run, although in the long run the effect vanishes), and improve the situa- tion of the domestic tradable goods industry: the output of the domestic tradable 16 goods industry increases by 1.2 percentage points; and in addition, production of domestic nontradables incr