Obama's 'nuclear option' on China's yuan
Selling US dollars at a lower price than the exchange rate would do much more to balance trade than pressuring Beijing.
As a candidate, Barack Obama said he would "insist that China stop manipulating its currency because it's not fair to American manufacturers." As president, Mr. Obama could have fulfilled that campaign pledge well before his visit to China this week.
But swaying China's yuan is easier said than done.
For years, Bush officials accused China of "manipulating" its currency by keeping the value of the yuan down against the dollar. They made little progress.
A cheap yuan lowers the cost of Chinese goods in the United States, while raising the price of US goods in China. In short, it's a major cause of the huge US trade deficit with China.
China desires to keep the yuan pegged to the US dollar at a low value because it believes this is the best way to boost Chinese manufacturing and create millions of job. Such domestic concerns explain why Beijing largely rebuffed efforts by the Bush administration, and now the Obama administration, to raise the value of its currency.
How could Obama break the impasse?
The first step is to get clarity on the problem.