krueger24_AN MING  Barcroft Media via Getty Images_renminbi An Ming/Barcroft Media via Getty Images

Trump’s “Currency Manipulation” Con

The long-awaited "phase one" deal between the United States and China has not ended US trade warfare. Instead, President Donald Trump's administration has devised yet another tool with which to tilt the playing field against foreign competitors, all but ensuring that damaging and unnecessary trade conflicts will continue.

WASHINGTON, DC – Would you believe the following story if you heard it? Imagine a small, rural town with one general store that sells to, and buys from, the farmers living in the surrounding area. Owing to their large families, the farmers have been running up a tab at the store, and they now owe the store a great deal of money. So, they organize a protest to demand that the store raise its prices on seed, fertilizer, and the like, while reducing the price it will pay for the farmers’ grains.

Obviously, the scenario is absurd. Paying even higher prices for agricultural supplies and receiving less for what they produce will not help the farmers pay off their tab. Indeed, either change would probably result in higher profits for the store, and greater losses for the farmers and their families.

In this nonsensical parable, US President Donald Trump’s administration represents the farmers. By accusing China (or any other country) of “currency manipulation,” the administration is effectively demanding that the Chinese appreciate their currency – that is, make each renminbi cost more in dollars.

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