The US Backs Off On Sanctions

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After a long, painful wait, lots of strong talk, and a 4-day visit by Senators to China, the US senate has taken a softer stance in relation to China and its management of the Renminbi (and the trade imbalance with the US). There had been a threat of a devastating 27.5 percent tariff being imposed on US imports from China – which would have hurt just about everyone, and helped very few. A new proposal would put a decision in the hands of the US Treasury Department, and would threaten milder sanctions.

On the Chinese sides it has been made clear by the Governor of the people’s Bank of China, Zhou Xiaochuan, that “shock therapy” would not be an option on currency reform, and that a “gradualist” approach would be taken.

In related news, a senior World Trade Organization (WTO) official has said what we, and other China watchers, have been saying for a long time – that China is in any case not to blame for the huge U.S. trade deficit and that protectionism is not a solution.

    “Trade imbalance with China has given rise to certain proposed measures in the Congress, and clearly the U.S. administration is watching that particular imbalance rather carefully,” said Clemens Boonekamp, director of the WTO’s Trade Policy Review Division. He continued: “But it’s not bilateral imbalance that you need to worry about, and to put it in more economic terms, the actual overall trade imbalance, the current account imbalance, is a result of policies elsewhere”.

Do we hear a collective sigh of relief? No doubt this story, and the domestic politics behind it, will continue to run.

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One Response to “The US Backs Off On Sanctions”

  1. Archive » Threats Don’t Work for the US in China| China Business Blog Says:

    […] China-U.S. Economic Dialogue” under his belt – has reportedly (via Bloomberg) told the stick-wielding senators (Schumer and Graham) to back off, and offers some good advice: • Thr […]

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