SENATORS in Washington last night voted through a bill that would allow the US to punish China for undervaluing its currency, amid fears of a trade war.
The bill, passed by 63 to 35 in the Democrat-led Senate with the help of nine Republican votes, was designed to encourage China to let its currency rise by giving the US the power to charge tariffs on goods from countries that have subsidised their exports via the currency market.
It was introduced after complaints that China’s yuan is undervalued by up to 40 per cent, giving its exporters an unfair advantage in international markets. US senators said this is leading to job losses and factory closures.
It remains uncertain, however, whether the bill will ever make it on to the statute book. It has been sent to the Republican-controlled House of Representatives, where speaker John Boehner has warned it would be “dangerous” for Congress to meddle with another nation’s exchange rate.
President Barack Obama has already accused China of “gaming” the international trade system but has indicated he wants to resolve the dispute diplomatically. He also wants to retain Beijing’s support in attempts to tackle Iran and North Korea.
If the President exercises his veto, however, it would enrage working class voters in states such as Ohio and Michigan in the run-up to the next election. Yesterday Hillary Clinton, the Secretary of State, sounded uncertain over the plan to charge countervailing duties.
“I don’t know whether this bill in the form that is passing the Senate will ever end up as a piece of legislation... But it does reflect a great deal of frustration on the part of the American people.”
It came as Obama admitted he may have to break up his flagship $447bn (£286.75bn) jobs bill in the face of opposition from Republicans and some Democrats.