Currency designation will initiate consultations on trade barriers
Washington. The Coalition for a Prosperous America (CPA) today strongly praised the Trump administration for formally designating China as a “currency manipulator.” US manufacturers have long complained about Beijing’s currency manipulation, which has made Chinese exports artificially cheap in the US market. This is the first time that the executive branch has taken such action.
“This is tremendous news, and long overdue,” said CPA chair Dan DiMicco. “For 25 years, Beijing has deliberately undervalued its currency to gain a major export advantage over US producers. And America’s manufacturers have paid the price. But Washington is finally paying attention. We commend the president and his team for taking this much-needed step.”
Starting in 1994, China began to peg its currency, the yuan, to the dollar at an artificially low rate. Since that time, the US goods trade deficit with China has grown exponentially. Last year it clocked $419 billion, roughly half of America’s global goods trade deficit.
The new designation as a currency manipulator will allow for consultations between the US Treasury Department and the International Monetary Fund (IMF) regarding China’s unfair competition.
Michael Stumo, CEO of the CPA, said, “Currency misalignment caused by an overvalued and noncompetitive dollar is the primary reason for continuing US trade deficits. It has cost America millions of manufacturing jobs in the past two decades and has driven down agricultural prices. The People’s Bank of China recently raised the yuan’s trading range above 7 to 1 against the dollar. This continuing manipulation simply pushes the dollar higher in relation to the yuan. President Trump should now use his authority to counter-intervene against the People’s Bank, and he should start managing the capital inflows that continually drive the dollar higher. He should also put the full force of his administration behind the passage of the Competitive Dollar for Jobs and Prosperity Act sponsored by Senators Tammy Baldwin and Josh Hawley.”
Last week, CPA strongly endorsed new legislation introduced by Sens. Tammy Baldwin (D-WI) and Josh Hawley (R-MO) that would require the Federal Reserve to achieve and maintain balanced trade for the United States through management of the US dollar’s exchange rate. CPA is also calling on the administration to provide more immediate relief for farmers and ranchers and a robust strategy to improve agricultural prices and incomes.
CPA has consistently urged policymakers to address the challenges posed by currency misalignment. Earlier this year, CPA researchers released a groundbreaking study on the impacts of a potential dollar revaluation. Adjusting the dollar downward by roughly 27 percent could yield an estimated $1 trillion in additional GDP and roughly 5 million new jobs over six years.
Read more about currency misalignment.
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