US protectionism is ineffective for the United States and dramatic for the global economy if it causes a fall in the exchange rates of the targeted countries

When analysing the effects of protectionism, we should not look only at its effects on foreign trade, but also on capital flows and exchange rates. We are now seeing that when the United States imposes tariffs on US imports from a country, capital withdraws from this country (probably in anticipation of the decline in growth) and its exchange rate depreciates sharply (this has been very clear for China, Mexico and Turkey). As a result: Tariffs are ineffective from the United States’ viewpoint since they are counterbalanced by the appreciation of the dollar; The countries whose exchange rates depreciate are hit by a loss of growth caused by the deterioration in the terms of trade (a loss of real income caused by the rise in prices of imported products).