Foreign Currency Cheating


The Currency Manipulation Problem Foreign currency manipulation is trade cheating because it is both an illegal tariff and a subsidy. The U.S. economy cannot produce jobs and wealth without addressing this problem.

China’s state managed economy poses the biggest problem to the U.S., making up 1/3 of our trade deficit Its currency is at least 35% undervalued. Our exports cost 35% more than they should to Chinese. Their sales to us are 35% less than free market value.

China, South Korea, Japan, Taiwan and Singapore, among others have manipulated their currency values. Our government has not protected U.S. economic and national security interests by neutralizing this practice.

How They Do It

The Chinese government must buy the massive amounts of dollars amassed by its exporters. It is a deliberate program which is expensive, but ultimately profitable. Thus, their foreign exchange reserves rapidly increase.

Economic Growth

Our manufacturers, agricultural producers and workers could export far more than they do if currency manipulation was neutralized. A 35% price cut for beef, aircraft, autos or equipment bound for China would spur exports and boost our job and wealth creation.

Trade Agreements Insufficient

The U.S. Trade Representative has refused to include trade agreement provisions that neutralize currency manipulation or other massive non-tariff barriers. Reciprocal tariff cuts matter very little when state-managed economies have many other modern tools to game the system, including currency cheating, border taxes, free credit, indigenous innovation requirements, and other tactics to hobble U.S. producers.

Job Losses: 2.8 Million jobs lost since China’s accession to WTO (EPI 2011)

Job Quality: More than two-thirds of the jobs displaced were in manufacturing. (EPI 2008)

Food: China has displaced tremendous volumes of U.S. seafood, apple and other food production

Subsidies: China’s foreign exchange accumulation enables massive subsidization of its steel, copper, technology, agriculture and other industries.


The persistent failure of high level diplomatic efforts to solve this problem underscores the futility of negotiating without leverage.

The US has the discretion, under WTO rules, to apply its trade laws to offset the injurious effect of any subsidy.

In the past two Congresses, one House of Congress or the other has passed legislation, by wide margins, that would direct the Department of Commerce to use WTO-consistent measures to offset currency subsidies found to injure American producers. Passage of that sort of legislation by both Houses (such as HR 639, 112th Cong.) is urgently needed.

Request: Please press the Finance Committee and House Ways and Means Committee to act. Cosponsor the bills when they are reintroduced. Urge the Treasury and the White House to endorse them.

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