Kathleen Madigan is the Big Picture columnist at Dow Jones Newswires. She covered the economy for over two decades at BusinessWeek and worked in the economics departments at several Wall Street firms. Let’s all blame China. The latest episode of U.S. China-bashing is a Senate measure that would call on the White House to impose unilateral and broad-based tariffs against countries with “misaligned” currencies. The bill could take on more urgency now that the Commerce Department said Thursday that the August U.S.-China trade deficit jumped to a record high of $28.96 billion. Beijing is not pleased. The People’s Bank of Chin a has been guiding the yuan lower versus the U.S. dollar since the U.S. Senate approved the bill. Yes, Beijing manipulates the yuan. U.S. politicians, however, are wrong to think a free-floating yuan will do much to dent the U.S. trade gap or boost economic growth. The Senate bill might even worsen the outlook. The action, which might not pass muster of World Trade Organization rules, “opens the door to similar non-conforming protectionist retaliation by China,” warns Carl Weinberg, chief economist of High Frequency Economics, “The resulting trade war would see both sides of the argument lose exports and jobs. No one wants to [see] that, not in these troubled times.” The nonpartisan Peterson Institute for International Economics calculates that every rise of 1% in the trade-weighted average of the yuan would cut the U.S. global deficit by $2.5 billion to $6 billion over the succeeding 2-3 years. Continue reading on Real Time Economics
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Chinese Bashing is All the Rage — But No Antidote
