Chart of the Day: Yuan Rises, Deficit Widens

The chart above is from The Economist, with the following commentary:

"As the chart above suggests, the recent relationship between China's currency and America's trade deficit with China is not what China hawks in the Senate think it is. Rather than a cheap yuan leading to a flood of Chinese imports, the yuan has actually strengthened as the deficit has widened. 

There are many things American companies dislike about the way business is done in China: intellectual-property theft, the impossibility of winning government contracts, baffling rules on corporate ownership and so on. However the place for fixing these things is the World Trade Organisation, not Congress. President Obama's administration has already passed on two opportunities to label China a currency manipulator, out of a well-founded fear of sparking a trade war. Senators should do the same (while hoping that China responds to their sabre-rattling by letting the yuan rise a little more, as happened the last time the Senate came close to passing a similar measure, in 2005)."

Related: Don Boudreaux responds to the "Everest of errors that is Peter Morici’s argument that the U.S. trade deficit plays a large role in keeping the U.S. unemployment rate high."