Quickly and strongly in a rare show of unity, China’s ministries of commerce and ‎foreign affairs, and the central bank of the country, refuted the U.S. Senate ‎vote that opened a week of debate on the Currency Exchange Rate Oversight ‎Reform Act of 2011, which would allow the U.S. government to slap ‎countervailing duties on products from countries found to be subsidizing their ‎exports by undervaluing their currencies.

US legislators argue that the American economy have lost many jobs as a result ‎of undervalue currencies against the US dollar, pointing mostly at the Chinese ‎Yuan. Moreover it will help Washington to close a $250 billion trade gap. 
China’s exchange rate has long been a sticking point between China and the US. ‎The Yuan has appreciated some 30% against the dollar since it was revalued in ‎‎2005, although many say that it is still valued too low and still gives Chinese ‎exporters an unfair competitive advantage in the marketplace. The bill ‎contemplates tariffs in under-priced imported goods.

The bill is still a long ways off.  In order for the bill to become a law it has first to ‎pass the Senate. Passage of the bill by the Senate would send it to the House.  ‎President Obama will then be the last to decide whether to sign the bill. The ‎calculus for all will be either a) “punish China, gain domestic points and risk trade ‎friction or worse” or b) “be pushy but restrained with China, risk voter wrath for ‎not doing enough on jobs and trade in the midst of a fragile US recovery and ‎expose yourself to opposition attack.”  It will be a delicate balancing act which ‎can easily go awry, especially given the hostile state of US politics.