Congress Addressing China’s Low Currency Rate

A Chinese factory

In the past few decades, trade relations between the U.S. and China have gone from zero to nearly $300 billion in trade revenue. China, being a communist nation, has the power to control their currency—and how high/low it is traded for. They set their currency very low, so to the U.S. their products will seem very cheap, and eventually we will buy more of it. In this NYTimes article by Jennifer Steinhauer and Mark Landler, a question is brought up of whether the U.S. government should do something about China’s low currency, because it affects American jobs. Currently in Congress a bill is attempting to be passed that would require the Treasury

Department to first decide if China is in fact controlling their currency too much, and if so require that the Commerce Department put a retaliatory tariff on some Chinese imports. This bill is favored among Republicans in the Senate, but not Republicans in the House—which will make passing it difficult.

Our American government is trying to relieve the stress of a slow economy by producing more jobs within our country—but as long as we have tight economic relations with China, that may be difficult. We have turned to China to get cheaper goods, but we are feeling the consequences of this now. If this potential bill is passed, buying Chinese goods would be more expensive—which

would drive us to buy more American goods…or would it? The main issue raised, that if we do divert our consumption away from China, these companies will just find nation’s equivalent to China and produce there, really doing nothing for America. The U.S. now spends close to $300 billion on Chinese goods, compared to $83 billion in the 1990’s. This huge spike in trade means that the U.S. has invested a great deal into China—and passing this bill or even pulling out completely from China would first crumble the world’s economy, and secondly destroy relations between China (a powerhouse country).

How does this affect YOU?

http://www.nytimes.com/2011/10/04/business/global/us-senate-backs-tough-china-trade-moves.html?scp=9&sq=China&st=cse