Trade War To Go DEFCON 4, As US Pushes For IMF Involvement In Dispute With China

geithner waving

Last week the House really fanned the flames of trade war with China, passing a bill (that will probably not hit the President’s desk ever) allowing for more tariffs should China continue to manipulate the yuan.

Of course, it’s not about the bill being signed. It’s about the message, and it’s about political pressure.

And now the US is going to more intensely enlist the help of the international community.


The United States is increasingly looking to the International Monetary Fund to hold countries like China accountable for “rebalancing” the global economy, a Treasury Department official said Tuesday.

The official, who spoke on the condition of anonymity under ground rules set by the Treasury, did not single out China by name but made it clear that the Obama administration was impatient over Beijing’s halting progress in permitting greater exchange-rate flexibility for its currency, the renminbi, as Chinese officials promised to do in June.

Something has to give here. No, China revaluing the yuan won’t end the trade balance overnight, or even over a few decades. There are plenty of deep structural reasons — which anyone at the PBOC could probably list in their sleep — for why the relationship and the trade balance won’t change much no matter what happens. But right now this fix is also causing a headache for countries around the world, who are trying to keep up with China, whose currency keeps falling in tandem with the dollar.

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