According to Glenn Reynolds: "Liberty Dog is a minarchist libertarian with Objectivist tendencies, but I can't even get my dog to crap outside."

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Sunday, April 10, 2005

Trade War

Against all economic logic, the US Senate is preparing to start a trade war with China.

The issue is the valuation of the Chinese Yuan. It is currently pegged at roughly 8.2 RMB to 1 Dollar. The prevailant though in the Senate is that the Yuan is undervalued and therefore adversely affects the US trade deficit with China. I haven't done enough study of the issue myself to determine if the Yuan is actually undervalued or not but I will say that I believe it should be allowed to float freely against the major currencies.

However, the answer is not place a 27.5% tariff on all Chinese goods. This will have a serious impact on everyday Americans. Chinese made goods account for a signifcant amount of the products sold in this country and a 27.5% increase in the cost of these goods would have the effect of both increasing the Consumer Price Index i.e. inflation, and also decreasing the amount and variety of goods available to the market.

In addition, the US exports more than $28 billion worth of items to China each year. The inevitable retaliatory action by China is sure to have significant impact on those industries exporting to China.

All of this for what? A trade deficit? They are hardly the nightmare proclaimed by the MSM, on the contrary they can actually be a sign of good.

Write your Senators and tell them that protectionism stinks and it hurts America.

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Copyright © S Michael Moore 2005