When Fallacies Collide
Five years ago the Trump complaint that Chinese currency manipulation was costing U.S. jobs had some validity — in fact, serious economists weremaking the same point. But these days China is in big trouble, and is trying to keep the value of its currency up, not down: foreign exchange reserves are plunging in the face of huge capital flight, to the tune of a trillion dollars over the past year.
Nor is China alone. All around the world, capital is fleeing troubled economies — including, by the way, the euro area, which these days tends to run bigger trade surpluses than China. And much of that flight capital is heading for the United States, pushing up the dollar and making our industries less competitive. It’s a real problem; U.S. economic fundamentals are fairly strong, but we risk, in effect, importing economic weakness from the rest of the world. But it’s not a problem we can address by lashing out at foreigners we falsely imagine are winning at our expense.