Should America launch a currency war against China?

A global trade showdown may be brewing, and pundits debate whether America should be taking the fight to China

The International Monetary Fund warns that a "global currency war" against China may be in the offing.
(Image credit: Corbis)

Long a source of displeasure in the U.S., China's long-standing policy of keeping its currency artificially low to boost exports may be on the verge of provoking a full-fledged trade war. Treasury Secretary Timothy Geithner has repeatedly urged China to institute a more flexible rate of exchange, and a congressional bill demanding the country raise the value of the yuan could require punitive tariffs on Chinese exports in months ahead. The International Monetary Fund is warning that a "global currency war" may be in the offing. Is it a fight worth picking? (Watch Tim Geithner press China on currency reform)

We must take on China aggressively, and quickly: The congressional bill is a "shot across the bow" at the Chinese, says Paul Krugman at The New York Times, and "a step in the right direction." China's defense of its policy is "implausible and wildly inconsistent," and it is long past the time for diplomacy. The Obama administration must now make a real "threat of retaliation" or watch the recession continue indefinitely.

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