The Yuan Revaluation Train has Left the…

The most pressing question facing China today is what US President-elect Barack Obama will do on trade issues, and specifically what he will do about the debate on whether the US Treasury should designate Chinese as a "currency manipulator." It is a major concern, Obama wrote in a letter to the National Council of Textile Organizations released on Oct. 24 that China must stop manipulating the currency. The decision he makes on the Chinese currency may be the single most important one he makes in his first 180 days – at least regarding implications for the global economy. If his treasury designates China a currency manipulator, this could trigger the kind of trade war that has the potential to repeat the history of the infamous Smoot Hawley Tariff Act of 1930, which raised tariffs on some 20,000 import items into the US to record levels and which some economic historians believe played a major role in what would become the Great Depression of the 1930s. Conventional wisdom suggests that while it is impossible to prove Smoot Hawley was responsible for the crash, it is likely to have exacerbated the depth of the ensuing Great Depression.

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