Now, the U.S. imports almost every conceivable product from China. It is estimated that the U.S. economy has lost more than three million manufacturing jobs to the Middle Kingdom.
Currency Manipulations
Nixon also relaxed currency controls allowing China to use American dollars. The Nixon Administration imposed no controls or regulations regarding China trade nor did it study what a trade deficit would mean to the American economy.
A major cause of the rapidly growing U.S. trade deficit with China is currency manipulation. Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar. Instead, China has tightly pegged its currency to the dollar at a rate that causes a large trade surplus with the United States.
As China's productivity improved, its currency should have been adjusted by Adam Smith's "invisible hand," increasing in value to maintain balanced trade. But the yuan has remained artificially low as China has aggressively acquired U.S. dollars to further depress the value of its currency.
To lower the value of its currency, a government can sell its own currency and buy foreign government securities such as U.S. Treasury bills. According to the International Monetary Fund, China purchased $337 billion in U.S. Treasury bills and other securities in 2011 to maintain the peg to the U.S. dollar.
Pollution
According to the New York Times, within four years China is expected to build 160 new coal-fired power plants, in addition to the 620 operating now. China will be building about one new carbon-spewing power plant every ten days. Chinese factories of all kinds do not have the pollution controls required in U.S. factories. Not only is this unfair competition, it is polluting the world and causing global warming. Our trade agreements with China place no restrictions on pollution.
Endgame
American consumers continue to be the drivers of the world economy.
What the future holds in the Trade War with China is not up to China. It is up to the America government, the American consumer and American companies. Our Congress must stop allowing Chinese pollution and currency manipulations. Consumers should vote with their wallets and just say no to imported products from China. American corporations are beginning to come back home and this trend must be expanded into a landslide that keeps the United States as the world leader.
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