While the Chinese currency appreciated strongly in the aftermath of the Global Financial Crisis, over the past 18 months that appreciation has almost completely reversed, with the Yuan now back to its weakest levels since the ’08 crisis. Yet that trend line obscures a number of developments that might surprise Trump and supporters of his China-related economic policy. Since 2014, the People’s Bank of China (PBoC) has indeed intervened repeatedly to affect the value of its currency, but almost invariably to strengthen the Yuan, not to weaken it. More recently, however, the PBoC has relaxed the intensity of its interventions, allowing markets to push the value of the Yuan downward, a reflection of both U.S. dollar strength and worries over the increasing slowdown of the Chinese economy. Despite its enduring popularity as political red meat, the value of the Chinese currency has never had a historic correlation with U.S. joblessness. U.S. job strength is not dictated by China’s currency regime, but rather by pro-growth U.S. government policies.
Donald Trump has made anti-trade rhetoric a centerpiece of his campaign. Trump seems to view trade as a zero-sum game where the U.S. always loses and ignores the evidence that trade makes Americans richer, including middle class Americans. Trump also ignores the evidence that TPP will give the U.S. a strategic upper hand in Asia, allowing us to push back against unfair trade practices by the Chinese.
Both presidential candidates oppose TPP and seem to oppose any new trade agreements. Over the past year, political support for free trade has taken a beating. But as a matter of policy, TPP is crucial to U.S. economic and national security interests since it would draw in U.S. allies, counter-balance China’s aggressive economic and military policies, and re-write the region’s economic rules based on American interests.