This has become the several trillion-dollar question since the greenback seems to have fallen through major supports against the yen and euro, without mentioning the Australian dollar.
Without returning to last year’s lows (1.60 vs the € and 87.25 vs the yen), the dollar’s depreciation in recent months is beginning to alarm many investors for whom the movement recalls some unpleasant memories.
But we are less worried about the dollar’s climb than we are the euro’s and yen’s relentless and unwarranted rise, in view of the difficult economic state of their respective economies, while the yuan continues to be contained by Chinese authorities.
This provides an enormous competitive advantage to Chinese goods against those from Europe and Japan. Moreover, I still can’t figure out why we do not have the possibility, like in the United States, to impose tariff sanctions against a country that we can prove is manipulating its currency – especially, since, unless I am sadly mistaken, we do not have to contend with the same capital dependency as the US.
In order to dig a little deeper and open up the debate on this subject, we have compared the trade deficit of the US with those of the three above-mentioned zones along with their currencies, since the explosive growth of Chinese trade surpluses in 2002 and the advent of the single-European currency in 1999.
You will see that the conclusions are far from obvious.
I purposely ignored the deficit vis-à-vis OPEP countries, which essentially depends on oil prices, so as to remain focused on the problem of international competitiveness and purchasing power parities.
In the first paragraph, below, you can see the bilateral deficits vis-à-vis the US.
As you can see, they are, in fact, fairly stable with Europe and Japan for the period 2002-2008, with a sharp
