Trying To Level The Playing Field Has Its Challenges

Fox Business posted an article today about the devaluing of the Chinese yuan. The devaluing of the Chinese currency (currency manipulation) has been used by China for decades to grow their economy at the expense of America. It has been used to lure manufacturing away from America, impact our trade balance, and generally work against the American economy. We have needed to combat this practice for decades, but no President had the courage.

The article reports:

The onshore Chinese yuan weakened to worse than seven per U.S. dollar, hitting its lowest level since 2008, as Beijing looks to cushion the blow from Trump’s tariffs. A weaker yuan makes Chinese goods cheaper for overseas buyers, which may be necessary as China just lost its spot as the US’s biggest trading partner.

Trade data released Friday by the Department of Commerce showed U.S. imports from China fell by 12% in the first six months of the year, allowing Mexico to supplant it as the U.S.’s biggest trade partner.

“China dropped the price of their currency to an almost a historic low,” Trump tweeted Opens a New Window. on Monday. “It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Last week, Trump said beginning Sept. 1 the U.S. would place a 10% tariff on the remaining $300 billion of Chinese goods. He went ahead with the announcement despite objections from his advisers.

The president warned he could “always do much more” with respect to tariffs, adding the 10 percent tax could go “well beyond 25 percent” if necessary. Earlier this year, the administration placed a 25% tariff on $250 billion worth of Chinese goods.

Weakening the yuan isn’t the only form of retaliation Beijing took on Monday. It also ordered state-owned enterprises to stop purchases of U.S. agricultural products, according to a Bloomberg report, citing people familiar with the situation.

That is a reversal from just last week, when Beijing said it had purchased several tons of U.S. soybeans Opens a New Window. as a gesture of a goodwill amid trade negotitations. Before the trade war began, China was the largest buyer of U.S. soybeans, accounting for 70% of all purchases, but their imports have fallen by 97% since the trade war began.

The article notes:

Over the weekened, The Trump administration pushed back against the idea the trade war was hitting the wallets of U.S. consumers.

“China has strategically gamed the tariffs by slashing their prices and by devaluing their currency,” White House trade advisor Peter Navarro told “Fox News Sunday.”

This trade dust-up with China may get ugly, but it is something that has to be done.

Will Starting A Trade War With China Create Jobs In America ?

Investors.com posted an editorial yesterday about the China currency bill the Senate is planning to introduce this week. The National Retail Federation (NRF) has stated their opinion that passage of the bill will cost American jobs–not create them.

Today’s Wall Street Journal (not linked–subscribers only) posted an editorial titled, “The Obama-Romney Tariff.” The article at the Wall Street Journal describes the bill as “the most dangerous trade legislation in many years.”

The article at the Wall Street Journal reports:

The legislation is now coming to the floor because Senate Democrats want protectionist political cover against unions in return for voting on the free-trade pacts with Columbia, Panama and Korea that President Obama finally sent to Congress yesterday. But what is cynical posturing in Washington may look more threatening to the rest of the world, and once trade wars start they can be hard to stop.

We do not trade with China on an even level–they use slave labor and they manipulate their currency to give themselves an advantage. The Chinese are not fair trading partners. I understand that, and I would like to see that change. However, this may not be the time to attempt that change. We need to clean up the internal downward forces on the American economy so that we approach this problem from a position of strength rather than a position of weakness. The answers to America’s economic problems are internal–they are not external. This currency bill is not Smoot-Hawley, but unfortunately, it may have a similar result.

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