Clearly, the heat is being turned up on China to allow their currency to appreciate against the US dollar in the hopes that this will reduce its trade surplus with the United States. Since 2005, the currency has appreciated over 18% against the US dollar and the trade surplus has not eased. While a free floating currency has many benefits for China and the US, it clearly is not the panacea for the trade imbalance. However, it is a great way for politicians to appear to be acting tough.
I've argued that the best way to compete with China and others is to put our US companies on the same financial footing by cutting corporate taxes to below the rates enjoyed by our trade partners. This is the swiftest method to level the global playing field and to the swiftest method to stimulate job growth in the United States.
Last week, the Obama administration announced an aggressive program to assist businesses with a rapid depreciation write-down period. This is a big step in the right direction. If they are truly interested in improving the trade deficit, they would announce a plan to cut corporate taxes and continue down this path towards improving US competitiveness.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.