The Obama Years- A GOP love story

[JoeRedskin]

And if you think the US/China trade is somehow encouraging China's "progress" towards democracy, I would suggest you are once again reading only that which you wish to believe. China is waging an economic war with the US in good old mercantile fashion ... and is winning.

We have a staggering trade deficit with China in large part b/c the govt. is pegging their currency at a value that undercuts the dollar. It is a trade war in the good old 19th century European fashion but China is the only one fighting it.

In 2012, the U.S. trade deficit with China was $315 billion. This was up significantly from the year before, when the trade deficit was $295.4 billion. Both were higher than any prior year.

The trade deficit exists despite the fact that U.S. exports to China were the highest in history. In 2012, the U.S. exported $110.6 billion in goods, an all-time record. Exports in 2011 were only $103.9 billion. However, imports from China also set a record -- $425.6 billion, more than the $399.3 billion imported in 2011.

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Quite simply, China is able to produce goods that Americans want at the lowest cost. How does China keep prices so low? Most economists agree that China's competitive pricing is a result of two factors:
1.A lower standard of living, which allows companies in China to pay lower wages to workers.
2.An exchange rate that is partially set to be always priced lower than the dollar.

US China Trade Deficit Explanation

Currency manipulation is a major cause of the trade deficit

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.2 Instead, China has tightly pegged its currency to the U.S. dollar at a rate that encourages a large bilateral trade surplus with the United States.

As China’s productivity has soared, its currency should have adjusted, increasing in value to maintain balanced trade. But the yuan has instead remained artificially low as China has aggressively acquired dollars and other foreign exchange reserves to further depress the value of its own currency. (To depress the value of its own currency, a government can sell its own currency and buy government securities such as U.S. Treasury bills, which increases its foreign reserves.) China had to purchase $337 billion in U.S. Treasury bills and other securities between December 2010 and December 2011 alone to maintain the peg to the U.S. dollar (International Monetary Fund 2012a). As of June 30, 2012, China held a total of $3.24 trillion in foreign exchange reserves (Bloomberg News 2012), about 70 percent of which were held in U.S. dollars. This intervention makes the yuan artificially cheap relative to the dollar, effectively subsidizing Chinese exports.

The China toll: Growing U.S. trade deficit with China cost more than 2.7 million jobs between 2001 and 2011, with job losses in every state | Economic Policy Institute

In addition to these currency manipulations, China has no respect for US trademark or patent law. China basically views intellectual property rights as a license to steal. It's a little dated but still a relatively accurate statement of China's views on IPR: World Trade Organization Adopts Panel Report in China - Intellectual Property Rights Dispute | Office of the United States Trade Representative

China is not our friend. China will "choose us" so long as they can manipulate the economic trade war to their benefit.