Escalating tensions between the two countries over trade policy, the U.S. House of Representatives voted on Wednesday "to address China's fundamental undervaluation of its currency."
Rep. Sander M. Levin, D-Mich., who sponsored The Currency Reform for Fair Trade Act, led the legislative body in pressing for passage of the bill to "hold China accountable and enforce the rules of international trade."
The overwhelmingly bipartisan vote, 348 to 79, allows for tariffs to be imposed on countries that chronically undervalue their currency. The U.S. trade deficit with China exceeded $200 billion last year. Similar legislation in the Senate will be voted on after the election.
Critics of China's monetary policy have long complained the country suppresses the value of its currency, making China's exports cheaper than they would be if China allowed its currency to be set by the market. China's currency policy places a drag on U.S. economic growth and job creation. Nobel Prize winning economist Paul Krugman estimates that China's currency policy reduces U.S. GDP by 1.4 percentage points annually.
"Today's passage signals an important advance in U.S. trade policy," said Levin. "By taking a stand today, this Committee takes the lead in standing up for American workers and businesses, and holding China accountable for the manipulation of its currency."