The Administration is again trying to jawbone the Chinese into revaluing their currency, i.e., floating it in the expectation that it will rise against the US dollar and make our exports to China more attractive. So on the one hand we have this giant communist country, growing rapidly, very nationalistic and whose leadership is not uninclined to gin up external conflict (in part to deflect domestic attention from its own authoritarianism); and on the other hand we have some short-sighted American pols trying to buy votes from stakeholders in US manufacturing companies. (Our recent boosting of textile tariffs is part of the same pattern.)
Politicians and exporters always want to run a weak-dollar policy, but it’s bad for importers, investors (remember who buys our bonds?) and most everyone else. We are attempting to contain China militarily and diplomatically while provoking it economically. That’s just stupid.
UPDATE: Larry Kudlow reprints an excellent NY Sun editorial on this topic.
UPDATE 2: Austin Bay puts the Chinese-currency controversy into geopolitical context, arguing that our anti-China economic moves are payback for China’s easing of pressure on North Korea in the context of the multi-party talks there. He may well be correct about the Administration’s motives, but I am skeptical that it is wise for us to respond by economic means. Indeed it may have been unwise of us all along to assume that China shares our interest in restraining NK, and to depend on China to do our work there for us (as Arthur Waldron argued in part in his article in Commentary a couple of years ago).