Skip to main content

What is Currency Manipulation

Currency manipulation is the practice of artificially setting exchange rates by the central banks of some of the U.S. trading partners in order to gain an unfair advantage. In addition to distorting the market, it is an illegal practice under both U.S. law and international agreements.

A number of our trading partners are manipulating the currency markets to keep the U.S. dollar artificially high, and their own currencies artificially low. By exploiting the world currency markets, countries like China and Japan effectively subsidize their exports to the U.S., and place a tariff on U.S. shipments to them. This manipulation is taking place on a massive scale. By some estimates, China’s Yuan is undervalued by as much as 40 percent in comparison to the U.S. dollar.

How does this happen?

Typically currency manipulation occurs when a country fixes the exchange rate of its currency relative to the currency of another country. It can include a requirement for a fixed exchange rate or the mandatory use of a country’s central bank for foreign exchange sales. This is done to give a country an unfair competitive advantage.

The effects of China’s manipulated and subsidized currency, for example, are extensive. First, China’s currency manipulation has contributed to the dramatic increase in the U.S. bilateral trade deficit with China, which now tops $268 billion a year. China has amassed foreign exchange reserves of more than $1 trillion, far surpassing any other nation’s reserves. China’s currency manipulation also attracts foreign investment into China and away from American manufacturing facilities. This flow of investment has already cost American workers their jobs.

When countries adopt artificial exchange rates that are not based on market forces, they not only exacerbate the U.S. trade imbalance, but they create global trade imbalances.

Additionally, currency manipulation results in a sizeable difference in labor costs. This difference creates the illusion of a comparative advantage for a given country. Ultimately, currency manipulation is a subsidy that can put American manufacturers at an unfair disadvantage in the global marketplace.

Source: Alliance for American Manufacturing

Popular posts from this blog

Steelworkers Organization of Active Retirees (SOAR)

Trump To Cut Social Security

Trump’s Promise Not to Cut Social Security has been Broken by Robert Roach, Jr. President Trump’s fiscal 2018 budget is a non-starter. He has betrayed America’s seniors. In fact, $2 trillion in deficit reduction turns out to be just a math error. The budget cuts $72 billion over ten years from disability programs, including Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Trump promised repeatedly to protect – not cut – Social Security. Yet his first budget does just that, harming millions of disabled Americans.  The Trump budget also slashes $1.4 trillion from Medicaid over 10 years. According to the Centers for Medicare & Medicaid Services (CMS), total Medicaid spending was $368 billion in 2016. Almost two-thirds of that was for seniors and people with disabilities, who rely on Medicaid for health care and long-term care. This cut is drastic and dangerous by any measurement. This budget also decimates the Community Development Block Grant, which pro…

The Ship of Fear

My Destroyer, the U.S.S. Walker, was tied up in Pearl Harbor.

The Newspaper headlines for several days along with lengthy articles told of a merchant ship, "the Pomona" that was tied up in Honolulu waiting for crew to take it to the far east. The Captain had been murdered while at sea and the crew was afraid that the murderer was still aboard. The ship finally got underway again and my memory is that it had rudder problems and had to return to port. Then, after getting underway again it had a fire on board and had to return again.

While on liberty one day in Honolulu, I stopped in at a saloon on my way back to my ship. There, I met a merchant sailor who happened to be a sailor aboard the Pomona. He offered to take me back to the ship and let me come aboard her. We did and headed for the bow of the ship where there was a lot of noise. There sitting on the deck were a number of sailors, mostly drunken, talking about their predicament.

This occurred sometime between 1961 and…