The Wall Street Journal notes Monday that "U.S. Treasury Secretary John Snow struck a surprisingly conciliatory tone after talks with China's top economic leaders," and that his comments "seem to put to rest speculation that the administration of U.S. President George W. Bush might declare China a 'currency manipulator' in a coming report as many in Congress are demanding." This jibes with our view, expressed yesterday, that the chances of a continued high-intensity currency and trade battle have diminished.
The Journal also notes, however, that "Mr. Snow's new stance could draw increased opposition from Congress, where a number of lawmakers are threatening to impose large tariffs on Chinese imports unless Beijing lets the yuan appreciate more sharply." The Treasury and White House will now have to make forceful and convincing arguments to lawmakers who had been led too far down a protectionist path. Undersecretary Tim Adams says the U.S. will continue to hold China to its "public" promises of a currency change. But just what the Chinese have promised is unclear. Many Chinese officials say many things, but the most high-level and high-profile statement made so far by China is President Hu's endorsement on Friday of stable exchange rates.
Either way, John Snow appears to be buying the world economy a bit more time.