The U.S. must address China’s deliberately undervalued currency.
What few seem to understand is that we are already in a trade war with China. It’s not one that we launched, nor one that we wanted. But China’s undervaluation of its currency, which violates world trade rules, is part of a deliberate, well-coordinated strategy to undercut U.S. manufacturers.
Currency manipulation has helped fuel China’s massive rise as a manufacturing powerhouse. And it’s also helped drive our massive trade deficit with Beijing, which reached a record $273 billion in 2010. This huge trade gap has cost 2.8 million U.S. jobs over the past decade—jobs in every state and congressional district, jobs in manufacturing, jobs in high-tech sectors… It’s a terribly one-sided trade relationship.
How did this happen? China intervenes in the currency market to buy dollars and set its own currency at an artificially low exchange rate. This makes Chinese goods 40% cheaper when entering the U.S. market while making our goods significantly more costly when exported to China.
The Senate is right to tackle this currency peg because it is probably one of the best, most immediate steps we can take to create U.S. jobs right now. Ending China’s currency manipulation could create as many as 2.25 million American jobs and reduce our budget deficit by up to $71.4 billion per year, according to a recent study.
This is a bipartisan issue, one that marks a clear chance for Congress to stand up to a very protectionist, predatory campaign. China can purchase dollars, which are freely traded, in order to set its currency peg. But conversely, it is illegal to buy China’s closely held currency.
It’s therefore impossible for Congress to interfere with China’s currency. But it can say “No more” by acting to stop an aggressive campaign that hurts U.S. manufacturers, distorts the global economy, and violates the principles of an open, free market.