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April 11th 2005

US may impose tariff on Chinese imports

The US Senate voted by nearly a 2-1 margin in favor of threatening China with tariffs, if it does not soon allow the Yuan to float. The proposition is extremely vague, and does not include a timetable for reforms, nor does it lay out a test to determine if the reforms have taken place. Rather it calls for a 27.5% across-the-board tariff on all Chinese imports. Massive factory closings and layoffs in American manufacturing sectors have led politicians to embrace a limited form of protectionism. With the recent elimination of quotas on Chinese textile imports, American textile production will probably soon fade into insignificance. Congressman are searching for any means possible to make American exports more attractive, and China’s exchange rate regime represents an easy target. China has two definitive options: it can embrace reform or accept tariffs on exports to America. Either way, Chinese imports may soon become more expensive. The Christian Science Monitor reports:

Letting the yuan "float" in global currency markets, however, would help level the competitive playing field between Chinese and American companies. But China refuses to do that, claiming that parts of its economy, such as banks, are still too weak to bear the pressure of global competition that a floating yuan would bring.

Read More: Freedom From China’s Currency

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Posted by Adam Kritzer | in Chinese Yuan (RMB), Politics & Policy | No Comments »

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