Fall 2008, Vol. 7, No. 3, Pages 61-95
Posted Online October 8, 2008.
(doi:10.1162/asep.2008.7.3.61)
Understanding the Sources of Friction in U.S.–China Trade Relations: The Exchange Rate Debate Diverts Attention from Optimum Adjustment*
Wing Thye Woo
Brookings Institution, Washington DC, University of California, Davis, Central University of Finance and Economics, Beijing Brookings Institution, 1775 Massachusetts Avenue, NW, Washington, DC 20036 USA. [email protected]
Abstract
China has been accused of exchange rate manipulation that has caused large U.S. trade deficits, which have reduced U.S. welfare by increasing unemployment and reducing wages. In fact, the strong claims by some observers that the trade imbalances are deeply deleterious to China's welfare almost make it a moral imperative for the United States to use tariffs to force an renminbi (RMB) appreciation for China's own good.
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