Friedman on Chinese Tariffs and Possible Trade War...

This is the best explanation I've seen that covers both sides of the argument.


(read entire article at...
http://www.ohio.com/editorial/thomas...ation-1.241063)

HONG KONG: After spending last week talking with Hong Kong entrepreneurs about a bill, just passed by the U.S. Senate, to clear the way for tariffs on Chinese exports to America if China doesn’t revalue its currency, there are three things I have to say. One, I really hope the people pushing this bill do not give up. Two, I really hope the people pushing this bill do not succeed. And, three, I really hope no one thinks this legislation will make any sustainable dent in our unemployment problem, which requires much more radical rethinking.

I support this legislation in theory because China needs a wake-up call. I know, China never responds to in-your-face pressure — not immediately. But it began revaluing its currency upward in 2005, the last time the Senate brandished a big stick. The fact is, China’s strategy of using low wages and a cheap currency to build up an enormous export-led growth engine — while using its huge market to lure and compel companies to transfer their next-generation technology to China as well — is now hurting both sides.

China is spending tons of money manipulating its currency downward and, in the process, creating domestic inflation and a real estate bubble, which is weakening its competitiveness. Meanwhile, it is hair-raising to hear stories in Hong Kong about the number of U.S. companies feeling the need to transfer advanced technology to China under pressure from Beijing officials — and being afraid to complain to Washington about unfair trade practices. Yes, China’s leaders, fearing unemployment, will revalue their currency at their own pace. But if pushing this bill even marginally slows the pace of American firms shifting operations here, and gives others more time to adapt, it will be worth it.