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Trump: China won't be labeled a currency manipulator

April 13, 2017

President Trump said on Wednesday that his administration will not label China a currency manipulator in a Treasury Department report due out this week.

April 12th, 2017 [Inside US Trade]

 “They’re not currency manipulators,” Trump said in an interview with the Wall Street Journal, adding that giving China the label now could hurt cooperation on efforts to contain North Korea.

Trump had pleged to label China a manipulator on day one of his presidency, but after taking office he deferred to the Treasury Department, which will produce its report on currency this week.


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  • I’ll go with a door that has laws behind it that congress may actually act upon. Countering illegal activity by the laws we can enforce has a better chance of working its way through the morass called DC than anything perceived as protectionism or market fixing.
  • Hi Bob,

    So, I have a question for you that I will pose in “Let’s Make a Deal” form with the proverbial 3 doors, of which I will present two options. And I invite you to respond by describing whatever you would like to see behind door #3.

    1. Bruce’s comments below summarize the consensus view of the majority of CPA members; which is that China is a lying, cheating, no-good, country that does not play by the rules. So they want to force China to conform, sanction them for currency manipulation, hit them with punitive tariffs, etc. This approach, however, just hit a “HUGE” road block, when as this article discusses the Trump Administration suddenly did an about face and declined to label China a currency manipulator. So behind Door #1 is the option of continuing to focus on vilifying China, pursuing punitive tariffs, eliminating domestic labor laws, environmental laws, etc.

    2. Another option would be for Congress to reassert its authority under the Constitution to regulate foreign trade. The steel industry would get a guaranteed market share of the domestic economy via hard quotas on imported steel. In exchange the industry would invest heavily and happily in the best production and environmental technology money can buy. And industries that we have lost would be revitalized on the same terms. For example the domestic hardwood furniture industry would be assured a 90% market share in exchange for taking wonderful care of our forests, etc.

    Door # 3 is all yours.

    Best,

    Jim
  • I have to take exception to the notion that labor is THE cost issue across the board. Currency is a huge issue for many industries including mine. In basic metals the products generally exported by China (they cannot make many higher end products) are so-called commodity grades. China is resource poor, particularly in quality issues like low sulfur coal, reasonably high iron content iron ore, etc. So, they buy the higher grades on global markets for the same price as other producers or use much higher cost-to-refine inputs. They also lack the sophisticated recycling chain we have in this country and thus import much of their scrap needs. When we look at their total cost of inputs it tends to be higher than US producers for both quality and purchased cost reasons. Part of the purchased cost is inbound freight. It is also a large cost in their export activities on “tonnage” products. The products they mainly export are produced in this country at or below 2 man-hours/ton, often below 1 MH/T. The cost to get their products to our markets thus negates any perceived labor advantage. They simply are not low cost. Further, having visited some of their “showcase” facilities their industry is one generation or more behind the US producers in terms of equipment and process technology and thus in efficiency. That their basic materials industries are most often SOEs, key to a manufactured products export strategy, are heavily subsidized and receive the benefits of rebated VATs is a big issue. Combined, it about matches their advantage due to currency undervaluation. I also don’t hear the hue and cry of the environmentalist community when Chinese industry greenhouse gas emissions are about 10X/ton produced of US mills. There is a cost associated with that as well. That they pollute their own air with particulate matter to an extreme and (by some estimates) 70% of their ground water is polluted is a large and growing social issue there but most certainly a “cost” advantage. Bottom line is that labor is often incidental in the total scheme of things. And, any assumption that technology/efficiency is generally equal isn’t accurate. The Chinese use every “trick in the book” and all must be addressed.
  • Hi James,

    I have been reading for years that Chinese currency is undervalued by about 35% – 40%, and that a tariff in the range of 35% to 40% would level the playing field. If you look at the cost of Chinese labor, it is about one-tenth the cost of our labor. Also, all of the other cost factors of manufactured products — material, overhead, energy, transportation, and compliance — consist mostly of hourly wages, or salaries. We can assume that all of China’s wages and salaries are in the range of one-tenth of our wages and salaries. And, of course, China’s cost of compliance is near zero, while our cost of compliance is through-the-roof and growing.

    China has our designs, our technology, our intellectual property, our manufacturing know-how, and our market. The barriers to entry for U.S. entrepreneurs are so high that a “level playing field” is meaningless. U.S. manufacturers would be essentially starting from scratch, with no guarantees that the next administration would be friendly to manufacturing.

    In my opinion, Communist China is a criminal enterprise. We should not be doing business with them at all, much less be allowing them to steal our technology, our intellectual property, and our jobs. China is draining our wealth, not for the benefit if its people, but to build up its military and to enrich the honchos of the CCP. Have you read “Death by China,” by Peter Navarro and Greg Autry? There is a video documentary version available for free on YouTube. China is cheating us in every way possible, and has been doing so for thirty years.
  • Hi Bruce!

    I believe all of the cost of production advantages would come out in the wash so to speak if currency values were determined strictly by the relative volumes of currency in circulation between two nations. It is important that China is able to sterilize its currency exchanges with the U.S. by purchasing our debt rather than commodities.

    That said, there is always something else going on that makes it impossible for the currency markets to force trade into balance. Everyone is, in effect, manipulating the value of their currency one way or another all the time. So events wind up controlling the operation of currency markets rather than the other way around quite often.

    In any case I always liked Buffets proposal but would prefer setting hard quotas in some industrial sectors via acts of Congress, rather than leave everything up to a certificate market. For one reason, the operation of the certificate market would eventually fail anyway just as the rest of the currency markets do.

    If you prohibited the foreign purchase of our debt, it would amount to much the same thing as Buffets proposal, I believe.
  • There is no need to manipulate your currency when your production costs are one-third to one-tenth those of your “trading partner.” China’s cost advantage is so great that they could double the price of everything they sell us. and we still couldn’t compete with them. Or, they could halve the cost of everything they sell us and no amount of tariffs would make a dent in the trade deficit.

    The only way to bring back U.S. manufacturing jobs would be to impose hard limits on the trade deficit. This was proposed by Warren Buffett back in 2003. You can Google “Balanced Trade,” for the whole story.
  • This is what happens when your critique of trade policy focuses on calling the other guy a “cheater”. It is geopolitically foolish – hence the North Korea problem is put in play viz a vie China! It also validates the ridiculous premise of Free Trade economists that everything would work out fine if we all just played by the rules. So in the face of geopolitical push back, you wind up trying to enforce fair trade laws domestically, which is like playing whack a mole with a marshmallow hammer.