China's exports in a protectionist world

Tariffs, currency wars, and protectionism pose risks for Chinese firms. In theory tariff increases and exchange rate appreciations exert equivalent effects on export volumes. This paper estimates tariff and exchange rate elasticities for China's exports. The results indicate that, while exchange rates matter, tariffs increases deter exports almost three times as much as equivalent exchange rate appreciations do. The results also indicate that China's flagship industries such as electronics and machinery are exposed to tariff increases and exchange rate appreciations. The paper then considers how China can promote freer trade to mitigate risks and reduce uncertainty.