Tags: Krugman | Trade | Tariffs | China | yuan

Krugman: Slap Trade Tariffs on China Now

By Dan Weil   |   Tuesday, 14 Sep 2010 01:22 PM

The United States should respond to China’s continuing currency manipulation by imposing tariffs on its exports, says Nobel laureate economist Paul Krugman.

U.S. efforts to make China let its currency appreciate have accomplished little, he writes in The New York Times.

“Nothing will happen until or unless the United States shows that it’s willing to do what it normally does when another country subsidizes its exports: impose a temporary tariff that offsets the subsidy.”

The Obama administration is reluctant to do so, because China plays a large role in financing our $1.4 trillion deficit by purchasing Treasuries. So it doesn’t want to risk upsetting China, lest that nation stop buying Treasuries.

“But this fear is completely misplaced,” Krugman argues.

“In a world awash with excess savings, we don’t need China’s money — especially because the Federal Reserve could and should buy up any bonds the Chinese sell.”

As for the greenback, “It’s true that the dollar would fall if China decided to dump some American holdings,” he writes. “But this would actually help the U.S. economy, making our exports more competitive.”

While the White House has been reluctant to act against China over the yuan, Congress may not be.

"Congress will move with some expediency," Charles Freeman, a former assistant U.S. Trade Representative now at the Center for Strategic and International Studies, told Dow Jones.

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The United States should respond to China s continuing currency manipulation by imposing tariffs on its exports, says Nobel laureate economist Paul Krugman. U.S. efforts to make China let its currency appreciate have accomplished little, he writes in The New York Times. ...
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