The RMB and the USA

Brad Setser responds to Greg Mankiw's article on the Chinese currency situation:

China cannot subsidize its exports without also subsidizing US consumption of Chinese goods – and US borrowing. Of course, some in the US are on the losing end of the “low-priced Chinese goods for high-priced US government bond” trade – and those losses aren’t equally distributed. Some parts of the country tend to produce more goods than compete with Chinese goods than others. But the US as a whole benefits from China’s willingness to subsidize US borrowing … and the purchase of China’s goods.

Call me skeptical.

But Setser's conclusion: we can give credit to China for allowing the RMB to appreciate, but still talk to them about continuing to move in the right direction. Hot headed rhetoric is the last thing the US economy needs at this junction. A "Schumer - Graham" -like China tarriff could be the start of major trade war.