It is important to understand that we are in a world of flexible exchange rates

In a situation of flexible exchange rates, some economic policies can have effects that are very different from the effects they would have in a situation of fixed exchange rate s . Let us take two recent significant examples: If the United States impose s tariffs on Chinese products imported to the United States but if , as a result , the Chinese renminbi depreciates against the dollar, the average price of Chinese products imported to the United States will not rise , and Chinese exports in volume terms to the United States will not decline ; If a no-deal Brexit leads to tariffs on trade between the United Kingdom and the European Union, but if the pound sterling depreciates against the euro, then UK cost competitiveness for product s aimed at Europe will not deteriorate.