How would strong Yuan help US Economy, because stronger Yuan means costly Chinese Import to America?
From China’s perspective currency appreciation means that their import will rise & exports will fall which would start hurt its economy. If the labor or overall cost of production is cheap in China, they do not bother. It’s not only USA that is suffering due to flood of cheaper Chinese good. Europe, Asia and Africa are also taking the hit. Weaker Dollar means expensive imports to USA. People argue that Dollar has substantially weakened against all currencies as compared to Yuan. About a year from now, Euro was 1.28 to a Dollar today Euro is 1.3620, which means Dollar during this period has weakened by 6.5 pct, during same period Yuan weakened by almost same percentage. So why is the problem? Oil is the biggest threat. Once the global war ends Oil prices should fall like a ninepin (Ranges between USD 30-40). To overcome deficit USA has to raise taxes, USA has to hike interest rates to make Dollar attractive and reduce domestic cost of production. A good example is that n the 70’s, One-U
