The Senate Is Wrong About The Yuan

ON OCTOBER 11th the Senate is due to vote on a bill that would lead to sanctions being taken against countries whose currencies are "misaligned". One currency in particular—the yuan—is on the minds of legislators.  But as the chart below suggests, the recent relationship between China's currency and America's trade deficit with China is not what China hawks in the Senate think it is. Rather than a cheap yuan leading to a flood of Chinese imports, the yuan has actually strengthened as the deficit has widened.