Tonight's Debate: What Talking Points Affect Your Business?
The third presidential debate is scheduled for tonight, 9:30 EDT. While the focus of the debate is foreign policy, with the economy being what it is (and also one of Romney’s chief attack points), I would expect the debate to turn back to economics and jobs whenever possible. One of the topics, the “Rise of China and Tomorrow’s World,” has the potential to swing towards the business-side of things, especially on China’s artificially deflated currency and the effect it is or is not having on the American economy. For those of you who might need a refresher, here’s a quick breakdown of the issue:
Why China’s low currency does (or does not) affect your business:
Some foreign countries try to keep the value of their currency low compared to the dollar in order to make their exports cheaper (If the U.S. dollar is worth more, U.S. companies can buy more exports, which in turn generates more wealth and employment for the foreign country.) The “downside,” or I guess counter to the benefit of cheaper exports, is that unbalanced world currencies make it difficult for countries with higher-valued cash (such as the U.S.) to compete with their own exports in the world economy. This is where the rhetoric of China “stealing” American jobs comes in, since by artificially keeping its currency low, China undercuts American manufacturing and exports, theoretically contributing to U.S. unemployment in those areas.
So why does this matter to you? Well, China keeping a low currency value would keep the price of your imports low and stable. A higher value could cause any number of things, from nothing (if value rises but remains low compared to the country’s manufacturing peers) to a big shift in where most promotional products are manufactured. Manufacturing shifts to other countries, such as India or Honduras, could happen, as could a rebirth of American manufacturing. Your imported product prices might go up, or they might not. American manufacturing could pick up, or it may not. It would depend on how fast currency values equalized, and across what countries. Were American manufacturing and/or exporting to significantly pick up, it would mean lower unemployment, theoretically helpful to your business across-the-board.