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Trade Imbalances and the Rise of Protectionism

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  • Martin, Philippe
  • Delpeuch, Samuel
  • Fize, Etienne

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.

Suggested Citation

  • Martin, Philippe & Delpeuch, Samuel & Fize, Etienne, 2021. "Trade Imbalances and the Rise of Protectionism," CEPR Discussion Papers 15742, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15742
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    1. Marcos Mac Mullen & Soo Kyung Woo, 2025. "Real Exchange Rate and Net Trade Dynamics: Financial and Trade Shocks," International Finance Discussion Papers 1419, Board of Governors of the Federal Reserve System (U.S.).
    2. Furceri, Davide & Ostry, Jonathan D. & Papageorgiou, Chris & Wibaux, Pauline, 2023. "Retaliation through Temporary Trade Barriers," CEPR Discussion Papers 17853, C.E.P.R. Discussion Papers.
    3. Mac Mullen, Marcos & Woo, Soo Kyung, 2025. "Real exchange rate and net trade dynamics: Financial and trade shocks," Journal of International Economics, Elsevier, vol. 157(C).
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    5. Gökhan Güven & Selim İnançlı, 2023. "Open‐access renewable resources and pollution: Trade and policy implications in a two‐country model," Review of Development Economics, Wiley Blackwell, vol. 27(4), pages 2583-2617, November.

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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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