China’s long practice of undervaluing its currency continues to take a toll on the U.S. economy; it has led to a growing increase in the trade deficit between the two countries, reduced U.S. GDP and has eliminated more than two million Americans jobs, by some estimates. As Congress and the Obama administration wrangle over ways to even the playing field for U.S. interests, expert Kenneth Lieberthal takes a closer look at China’s currency policy.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.