Federal Reserve Chairman Alan Greenspan said there would be large risks to the global financial system if the United States imposed unilateral across-the-board tariffs on Chinese imports.
Referring to a bill before the US Senate threatening a 27.5% tariff on all Chinese imports if China does not revalue its pegged yuan exchange rate, Greenspan said this was the wrong tactic.
“My basic concern is that if we are forced to implement a very significant unilateral tariff, the dangers to the overall financial system, in my judgement, are very large,” he told a Senate Finance Committee hearing on US-China relations.
Treasury Secretary John Snow told the same hearing that a yuan revaluation would lead to other currency adjustments across Asia.
But Greenspan said a global currency accord along the lines of agreements in the mid-1980s may neither be possible, nor desirable, any more because of the globalization since then.
“The world is different from the days of Plaza,” Greenspan said, referring to the so-called Plaza Accord among the top economic powers to weaken the dollar in 1985.
“I don’t think it’s possible, even if it were somehow conceptually desirable—and I’m not sure that it is.” (Reuters)