"A House panel, in a move likely to increase trade tensions with China, approved on Friday a bill that allows the United States to slap duties on goods from countries with fundamentally undervalued currencies."
This could be just election season political posturing or the start of something big for currencies, price stability and the persistent U.S. external deficit.
4 comments:
This is the logical outcome of all nations trying to export their way out. Trade tensions are only going to increase.
Michael Pettis and Andy Xie have been warning about impending an impending trade war between the US and China for some time, and how bad it will be for both countries.
This is at the basis of the European kerfuffle, too. Germany exports to the periphery but its banks have to take on the periphery's debt. Now the ECB is having to step in to prop up the asymmetry, while forcing austerity on periphery populations. Ain't gonna work, either.
Tom,
One focus I apply to this issue is its effect on price stabiltiy...do Pettis or Xie have a view on what this may/can do to prices in the US?
My initial view is it would create so-called "inflation" in the US by increasing the price of many industrial components and certain low-tech finished goods (WAL-MART stuff). Then the Fed will face their nightmare scenario of "stag-flation" with high unemployment. Then what will these bozos do?
Starting a trade war this way to fix decades of bad trade policy will create economic calamity in way that congress hasn't even begun to imagine. Had the congress and former President's slowly removed trade barriers and ensured that each region had a strategic plan to build & attract other industry as theirs collapsed from cheap imports we wouldn't be in this mess where people can't work, can't pay mortgages, etc. Tariffs won't fix bad governance.
This sounds like a good experiment.
Start the trade war as soon as possible, and even hit China for sanctions with any of it's business dealings with Iran.
Then get American's to save by buying up the debt the Chinese are already bailing out.
I'll be right there trying to pick up the lost imports with Made in USA written all over it.
Post a Comment