"The most notable feature in the pattern of currency appreciations is that China, the nation running the largest bilateral trade surplus (i.e., exporting to more than they import) with the United States, has seen no appreciation. The Chinese government actively pegs the value of the Chinese yuan at a predetermined level to make Chinese products more competitive against U.S. goods. Two other nations, Malaysia and Taiwan, also actively set their currencies to the U.S. dollar, allowing almost no movement in their value.
This pattern of currency changes implies that none of the increase in U.S. GDP in the short term will come at the expense of China, Malaysia, or Taiwan. Rather, the bulk of the adjustment to the lower value of the dollar will be borne by the euro area, Canada, Mexico, and Japan. Thus, the bilateral depreciation of the dollar to date has not been in proportion to the U.S. bilateral trade deficit. This pattern is shown in Figure 3."
>>> Thus: some benefits to manufacturing... but no improvement for the US trade deficit (until the Asian currencies are forced to float... or we handicap their exports some other way.) |
