IChina’s Currency Manipulation Senator Sherrod Brown (D-Ohio) says his Currency Exchange Rate Oversight Reform Act of 2011, which has already passed the Senate, “would ensure a fair and level playing field for American manufacturers.” Under the bill, the U.S. Treasury Department would be respon sible for identifying countries with undervalued curren cies, and then the Commerce Department would impose tariffs on imports from those countries. China argues that its currency has appreciated against the dollar.

Source: The Hill’s Congress Blog: http://thehill.com/blogs/congress-blog/

economy-a-budget/237423-currency-manipulation-gives-chinese-an unfair-advantage.

a. China has resisted letting its currency rise against the dollar. Why?

b. Senator Brown argues that Chinese currency manip ulation acts as a tariff against American exports, and that American jobs are lost as a result. Do his argu ments have merit? Explain.

c. How might China react if the Commerce Department imposes tariffs against Chinese goods and services?

d. Is China vulnerable to a speculative attack because of its currency manipulation?