A policy brief issued last month by two scholars from the Peterson Institute for International Economics found that currency manipulation by U.S. trading partners - especially China - is directly responsible for inflating the U.S. trade deficit by between $200 billion and $500 billion per year. Moreover, the study concludes that foreign currency manipulation has cost the United States between 1 million and 5 million jobs. In response, the policy brief calls on the Obama administration to assemble a broad coalition of countries adversely affected by currency manipulation. Together, these countries should consider a variety of macroeconomic and trade policy responses, including the imposition of countervailing duties (CVDs), a World Trade Organization legal challenge and a kind of tit-for-tat action whereby the U.S. and other affected countries intervene in foreign exchange markets.
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