He and other critics allege that an artificially low exchange rate for China’s currency, the yuan, allows its products a home-field advantage when U.S. exporters sell there and makes Chinese products cheaper in the United States, undercutting manufacturers. When Obama came into office, the yuan was thought to be undervalued by about 22 percent; now that figure is around 7 percent.
China is the largest U.S. creditor, and it warned last week in a pair of commentaries published by the state-owned news agency Xinhua that it wouldn’t sit on its hands should Romney or Obama take a more aggressive stance against its exports. In one commentary, China warned that punitive tariffs on its products could “lead to a trade war that would benefit neither side.”
If beating up on China is good politics, it’s bad economics, at least in today’s environment. The U.S. growth rate has been subpar and sluggish since the end of the Great Recession in June 2009. The United States is barely adding to global growth. Europe, in the grip of its own debt crisis, is subtracting from growth. China has kept the global economy moving forward.
“I think the best contribution that China can provide to the global economy is taking volatility out of the global economy. And China has been doing that,” Goldberg said, staying out of the political debate but noting that economists are watching China’s slowdown with interest.
A trade war with China would squarely hit growing U.S. exports there. China is now the third largest market for U.S. exports. In 2000, the United States sent $16.1 billion in goods to China, a number that grew to almost $104 billion last year. The problem is that China’s exports to the United States totaled about $100 billion in 2000 and last year stood at just under $400 billion.
The U.S. farm belt is one likely place China could retaliate.
U.S. farmers and ranchers exported almost $19 billion in products to China last year, the second largest market in 2011 for U.S. farm products. Soybeans from the Midwest made up more than half that at $10.5 billion, followed by cotton at $2.6 billion.
Exports have been one of the few bright spots in an underperforming U.S. economy. Hence, whoever wins on Nov. 6 may want to tread carefully with China, said Alan Levenson, the chief economist for investment giant T. Rowe Price in Baltimore.
“Provoking a trade war now is not good for growth, and worldwide, trade is already showing signs of topping out,” he said, noting that global trade has returned to where it was before the 2008 financial crisis but hasn’t expanded much beyond that.
Tom Lasseter contributed to this article from Beijing.