Krugman, in his Op-Ed column in NYTimes, wanted the US government to impose 25% duties on Chinese imports. That opinion may sound as protectionism, but something drastic will happen soon with international trade.

China is known to keep its Renminbi artificially low and make the exports competitive. Now the matter has come to a head. Most major developed countries are suffering huge trade deficits while China is hoarding $2.4trillion plus reserves that are increasing by $30bn every month.

The trade imbalances are so huge that it spilled into every policy discussion about China. Clearly there is a trade war at hand. One of the two scenarios is likely to happen in near future. Developed countries will raise the trade tariffs sharply on Chinese imports, or China will let Renminbi appreciate.