That global trade imbalances matter has been made abundantly clear by the ongoing global economic malaise. The likely path to more sustainable levels of trade deficits, however, remains far less clear. Consider the potential global impact of populist cries for protectionist trade policies ostensibly aimed at easing the difficult transition to more sustainable trade and debt balances. In the event of a trade war, we would all lose. Perhaps even more disquieting, however, is how these consequences would most likely play out across nations.
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