China backlash?

The New York Times reports that US Senators Grassley and Schumer have drafted a Senate bill to raise tariffs against China unless China re-values its exchange rate rate:

WASHINGTON (Reuters) - The U.S. Senate could vote next month on rival bills affecting trade and currency relations with China, a top U.S. senator said on Wednesday.

Schumer and Graham have emerged as the Senate's most vocal critics of China's currency policy...The senators contend China's currency is undervalued by 15 to 40 percent. Their bill directs the White House to impose a 27.5 percent tariff on goods from China if Beijing does not significantly raise the value of its currency within six months...

The possible Senate vote has raised concerns of a Chinese backlash, especially if the House of Representatives were to approve a similar measure. Free traders argue the bill would also impose a huge tax on U.S. consumers....

Schumer and Graham first offered their bill as an amendment to other legislation in April 2004. In a sign of growing anger in Congress over the massive U.S. trade deficit with China, the Senate voted 67-33 against an attempt to kill the measure....


Former Federal Reserve Board Chairman Alan Greenspan gave a speech a year ago suggesting why forcing China to revalue its currency most likely will not correct the US global trade deficit.

Comments

Anonymous said…
I saw this news piece at cnn.com, which talks about how China's trade surplus hit $18.8 billion, much higher than what was predicted. This has also led to inflation, although not by shocking amounts. tying that into this news article, even though trade surplus is bringing in a lot of money, savings is high and thus the money stays in the economy. But with the increasing inflation rate, people will be forced to spend money and I feel that the inflation rate will continue to rise slowly until the economy booms, which in turn will increase inflation rate by a lot as well.
2:49 PM
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