Tariffs Against China May Not Be Best Idea
Alan Greenspan, Chairman of the Federal Reserve, and John Snow, Treasury Secretary, told the U.S. Senate Finance Committee that placing tariffs against China isn’t the best idea.
Greenspan and Snow said that even if China revalues its currency, there isn’t any evidence to show that the economy of the United States would be improved.
The two claim that if tarriffs are placed on Chinese imports, the United States would just be more likely to receive imports from other Asian countries.
“The broad tariff on Chinese goods that has recently been proposed, should it be implemented, would significantly lower US imports from China but would comparably raise US imports from other low-cost sources of supply,” said Greenspan. “US imports…would in part shift from China as the final assembler to other emerging-market economies in Asia and, perhaps, in Latin America as well. Few, if any, American jobs would be protected.” Glen Somerville of Reuters reports:
Clearly worried that spiraling U.S. deficits were driving Congress toward trade action, Greenspan and Snow sought to tamp down the angry mood by pointing out the possible consequences for the United States.
Both said China should loosen the peg it maintains for its yuan currency against the dollar, in its own interest and that of the global economy, but said it would be futile to try to force Beijing to do so through trade sanctions.
“A policy to dismantle the global trading system, in a misguided effort to protect jobs from competition, would redound to the eventual detriment of all U.S. job-seekers, as well as millions of American consumers,” said Greenspan.
China recently reached an agreement with the European Union over similar trade issues. They agreed to put limits on certain textile imports for the next three years.