Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Obama gives China a free pass to continue currency manipulations
On May 13, the United States and China concluded the third meeting of the U.S.-China Strategic & Economic Dialogue. A joint factsheet about the meeting, which appears on the Chinese Ministry of Foreign Affairs website, lists the terms of the agreement. In return for a some concessions, mainly to those American businesses that already market to China from China, the Obama administration gave the Chinese government a free pass to continue their currency manipulations. Here is the relevant section of the agreement:
China is not being required to let its currency, the RMB, rise versus the dollar, they are being permitted to continue to shadow the dollar with their exchange rate. As Nouriel Roubini recently pointed out, this artificially weakened RMB forces other emerging market governments to manipulate their exchange rates versus the dollar so that China doesn't steal market share from their industries. The worsening U.S. trade deficit that will result from almost all of the emerging market governments manipulating currency exchange rates will likely grow the U.S. trade deficits and prevent the U.S. economic recovery. In other words, President Obama has agreed to let China steal American economic growth.
Journal of Economic Literature:
Atlantic Economic Journal: