Trade wars and tariffs never solve anything. Nonetheless Congress addresses Chinese currency manipulation
Tariffs Will Cost JobsAfter years of trying, Congress is taking another stab at retaliating against what many see as Chinese manipulation of its currency to make its exports to the United States cheaper and U.S. goods more expensive in China.
The Senate is expected to take up legislation Monday that would impose higher U.S. duties on Chinese products to offset the perceived advantage that critics say China gets by undervaluing its currency.
The Senate bill has bipartisan support and is expected to clear a procedural hurdle Monday evening. But intense lobbying against it by American-based multinational corporations and their trade associations could spell trouble for the legislation.
Sens. Chuck Schumer, D-N.Y., and Lindsey Graham, R-S.C., along with others, have tried for at least six years to pass legislation making it easier to impose higher tariffs on Chinese goods. That would help compensate for what they say is Beijing's effort to keep its currency, the yuan, undervalued against the dollar.
Among Republicans, presidential hopeful Mitt Romney has said he would penalize China for keeping its currency artificially low.
The Senate bill, which does not specifically mention China, has two main components:
--Up to now, the Treasury Department has had to declare that a country was willfully manipulating its currency to trigger a response, which is something the Bush and Obama administrations have avoided doing. The legislation would require Treasury to determine only that another country's currency is misaligned, then give its government 90 days to make corrections before countervailing duties are imposed.
--The bill makes it easier for specific industries to petition the Commerce Department for redress under claims that the misaligned currency of China or another country amounts to an export subsidy. That more narrowly focused provision passed the House last September on a 348-79 vote. The last Congress, however, ended before the Senate could take it up.
Supporters point to studies by the Peterson Institute for International Economics that say a 20 percent appreciation of the yuan would reduce the U.S. trade deficit by up to $120 billion and create a half-million U.S. jobs. The more liberal Economic Policy Institute estimates that a 28.5 percent appreciation would create more than 2 million jobs.
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