Saturday, May 17, 2008

Bush's administration's jawboning trade policy with China ends in utter failure

For the past several years, the Bush administration has been telling US manufacturing industries to just be patient. The Chinese government, who tightly controls the price of the dollar in terms of the yuan, would strengthen the yuan versus the dollar.

Indeed the Chinese government did respond to Bush administration "jawboning" by strengthening the yuan versus the dollar a bit, but not enough to actually cause our trade deficit with China to improve. Instead the trade deficit continued to worsen. On March 20, the Chinese government stopped strengthening the yuan as shown by the graph at the following website:

This graph shows that China has stopped complying with the Bush administration's request that it strengthen the yuan vs. the dollar. Bush's "jawboning" with China has thus ended in complete and utter failure.

It is not clear whether the Chinese ended their compliance with Bush's strategy in defiance of the Bush administration or whether the Bush administration themselves asked China to give up that policy.

Whatever the reason, the result is predictable. The Chinese will steal American industries at an even faster rate for a while.


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