The Bush administration heaped insult on top of congressional injury last week, putting the screws on China on its inflexible exchange rate.
In its semi-annual foreign exchange report, the US treasury criticised China's "rigid currency regime" but stopped short of accusing it of manipulating its currency.
For most observers, it was a distinction without a difference.
China was put on notice that unless it did something before the next scheduled report in October, it would be tagged as a manipulator, making it easier for congress to impose sanctions.
It's not as if China is doing something new, says Dan Griswold, the director of the Cato Center for trade policy studies.
"China has held its currency at the same rate for a decade, through financial ups and downs," Griswold says. "It's the opposite of manipulation."
Dan Katzive, a currency strategist at UBS, says China kept its peg at 8.28 yuan to the dollar "when the pressure was going the other way in 1997 and 1998" following the Asian financial crisis. That suited the US just fine.
Nor is its peg unprecedented.
"Hong Kong had a fixed exchange rate, many Latin American countries have dollarised, and the whole Bretton Woods system was based on fixed exchange rates," Griswold says.
The only thing that's changed is the political environment. The US trade deficit with China rose 39 percent to $42.03 billion (R277.4 billion) in the first quarter from a year earlier, according to commerce department data. Some of the surge was the result of the lifting of the decades-old quota system on textiles.
China's soaring trade surplus with the US comes at the expense of other Asian producers. Last year, China accounted for 57 percent of the US trade deficit with the Pacific Rim, up from 36.8 percent five years ago. In 1994, China's share was a quarter.
Katzive says two other things have changed to spark the China bashing: one, until recently China ran a trade surplus with the US but had a balanced external account with the world; and two, China's reserve accumulation has been "off the charts", suggesting the yuan is undervalued.
Congress wasn't looking to the administration for leadership in its posturing on the trade deficit.
US law makers have been hard at work concocting stupid solutions, creating the appearance of doing something to restore vanishing manufacturing jobs - and scoring points with their powerful constituencies back home.
The senate is considering laws that will slap tariffs of up to 27.5 percent on Chinese imports unless China moves to a more flexible exchange rate in six months.
It sounds as if the administration is trying to deflect rising discontent and head off congress's less palatable solution.
"It's like fighting a forest fire with a backfire," says Phil Swagel, a scholar at the American Enterprise Institute and a member of President George W Bush's council of economic advisers during his first term.
Even if China's currency is undervalued by 27 percent, US consumers benefit from cheap goods, and the "Chinese are paying 27 percent more for our bonds", he says. "What part of that don't they like?"
At some point, China will let its currency float. The choice of timing should be China's.
If the goal is to make China's exports more expensive, a floating exchange rate is a lot better than tariffs or quotas, which help the few (manufacturers) at the expense of the many (consumers).
But will a revalued yuan prompt a resurgence in US manufacturing? The answer is no.
"The goods we import from China aren't made here," Griswold says. "China is replacing the goods that were made in other east Asian nations", including toys, apparel, footwear and low-end consumer electronics.
In June 1979, factory workers comprised 21.7 percent of the workforce. Today, they represent 10.7 percent of all employees. Manufacturing productivity has risen at an average 4.5 percent a year over the last decade.
"If there is a significant increase in import prices of Chinese goods, it does not mean that US retailers and consumers will shift to domestic US sources," Federal Reserve chairman Alan Greenspan said a week ago. It was "quite unlikely" to lower the overall US trade balance, he said.
Is this so difficult to understand? Maybe someone in the administration should try to explain it rather than grandstand.
If China lets the yuan rise by a modest amount, the US is not going to build a single factory to manufacture sweatshirts or sneakers. Not one. - Bloomberg