(Josh Bivens, Dean Baker & Michael Madowitz – Wall Street Journal)
President Trump spent much of his 2016 campaign shouting about the dangers of Chinese currency manipulation leading to trade deficits and U.S. job losses in manufacturing. He promised to take action. To date, he has taken no visible action against China over its currency policy. Furthermore, he is now actively considering candidates for Federal Reserve Chair whose policies would amplify currency misalignments, grow trade deficits and risk more job losses in manufacturing than any trade deal he can sign.
The administration’s choice on Federal Reserve chair will likely have more effect on trade flows than any trade deal. And if the administration risks going against precedent, financial markets’ and other central bankers’ advice and decides to not re-appoint Janet Yellen, the choice will almost certainly undercut Trump’s promises on trade and trade deficits. The finalists, with the exception of Janet Yellen, have views on monetary policy, financial regulation, and trade agreements at odds with Trump’s on his signature claim of protecting American jobs from trade.
Candidate Trump took a strong populist tone on trade. Indeed, he cited work on the costs of free trade deals and currency manipulation by the Economic Policy Institute, a group many conservatives are loathe to acknowledge, in part because it sticks up for workers. But managing the United States’ trade balance is more than the art of the deal. Click here to read more.