US Currency Wars With China Looms

A trade war between the US and China, with tariffs and taxes, recriminations and retaliation, may be a modestly troubling prospect compared to a currency war.China’s Commerce Minister Chen Deming said ”The currency is a sovereign issue and should not be an issue to be discussed between two countries. He warned that if the US labels the world’s third largest nation by GDP a “currency manipulator” that China will take the issue to the international legal authorities, according to a report by Reuters.

A currency war between China and the US seems inevitable now. China is unwilling to let the value of the yuan “float” and be determined though the normal forces of trade and currency trading. If the American government does plan to make a stand, it has no better time that to do it now to strengthen its level of exports and use that to help the US economy recover. As a by-product, manufacturing jobs in America should pick up and unemployment should fall. One of the single largest issues facing job creation in the US is that the relatively high-paid factory job base has been decimated by the shuttering of many facilities in the auto industry. Most economists believe that those jobs will never be replaced. An improved ability of America to be competitive as an exporter of goods would bring back some of that worker base.

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