China has been accused of exchange rate manipulation that has caused large U.S. trade deficits, which have reduced U.S. welfare by increasing unemployment and reducing wages. In fact, the strong claims by some observers that the trade imbalances are deeply deleterious to China's welfare almost make it a moral imperative for the United States to use tariffs to force an renminbi (RMB) appreciation for China's own good.

I am grateful to the Asian Economic Panel for insightful comments on an earlier draft; and to Gary Burtless for invaluable help compiling labor market data.

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