Don’t Blame China’s Currency for U.S. Trade Deficit

The International Monetary Fund’s reduced medium-term forecast for China’s current-account surplus of about 4 percent of gross domestic product is belated recognition of recent developments. The adjustment may still turn out to be too high, but good luck telling that to U.S. politicians.

America’s trade deficit with China hit a record $295 billion last year. Protectionist sentiments are running high, with recent U.S. complaints filed with the World Trade Organization and in March of a countervailing tariff bill. Such measures have been accompanied by a familiar chorus calling for a major revaluation of the yuan to counteract China’s alleged currency manipulation intended to keep its exports cheap.