Barron’s made Donald Trump’s shocking degree of economic illiteracy its cover story this weekend. Trump says China doesn’t play fair in trade because it’s manipulating the yuan lower, but in real life it’s spending billions in order to push the yuan higher. Either the candidate understands this and is deliberately lying to drum up populist support, or he doesn’t understand this, in which case he is unfit to even discuss the topic.
I don’t know which is scarier.
Randall Forsyth dissects the presidential hopeful’s ignorant statements about currency exchange rates, point by point:
By threatening to impose tariffs on China in retaliation for its alleged currency manipulation, a President Trump would risk starting a protectionist war similar to the one that helped precipitate the Great Depression. More worrisome, this would come while tensions between China and the U.S. over disputed islands in the South China Sea are escalating.
Those concerns, at this point, thankfully are hypothetical. But Trump’s recent bluster about China’s currency betrays a deep lack of knowledge of economics, as well as of the actual facts and data driving the exchange rate.
Most important, the Chinese yuan or renminbi is fundamentally overvalued, not undervalued, as Trump asserts. Moreover, if any manipulation has occurred recently, it has been meant to prop up the currency, not lower it. Despite barriers erected by the government, capital is fleeing the yuan because of its negative fundamentals and those of China’s economy.
…Trump doesn’t let any of this get in the way of his story.
How is it possible that Trump and Ben Carson are the frontrunners for a party that has historically championed business and Corporate America?