The Senate voted 63-35 Tuesday evening to give the Treasury Department and U.S. companies more leeway to target foreign currencies that are being manipulated in value, a measure that is effectively aimed at China’s yuan.
Although China is not named in the bill, its backers clearly had China in mind when they drew up language aimed at “misaligned currencies.” Critics of China’s trade policies say it unfairly keeps its currency about 25 to 30 percent lower against the U.S. dollar than if the yuan were freed to find a natural value in foreign exchange markets.
That gives China a big pricing advantage, making its goods cheaper against U.S.-made products in the U.S. while U.S. exports automatically become that much pricier in China. Defenders of the bill say China’s currency manipulation and other actions have stripped the U.S. manufacturing sector of many jobs.
While the vote reflects Senate anger toward China in trade matters, it is not clear the legislation will ever become law. House Speaker John Boehner last week called it a “dangerous” bill, which some took to mean he may not even bring it to the House floor for a vote in that chamber. Other GOP officials have called on President Obama to state his position on the measure.
Meanwhile, a number of companies and business groups including the U.S. Chamber of Commerce and National Retail Federation have warned that passage could risk a broad trade war with China or other trade retaliation by that nation.
The bill makes it easier for Treasury to declare a currency misaligned, and then apply sanctions if that country does not take action to adjust its currency. China in recent years has allowed its currency to increase in value slowly against the dollar, but not fast enough for the Senate.