The U.S. trade deficit as an American problem

Over the last several years, the U.S. has been accusing China of manipulating its currency to keep it undervalued against the U.S. dollar. As a result, the prosecutor claims that the U.S. has been running a persistent trade deficit with China caused entirely by currency under-valuation. We argue that the U.S. trade deficit is an American problem caused by excessive spending, extremely high indebtedness, inadequate saving and the abandonment of manufacturing industries. It demonstrated that the alleged under-valuation of the yuan is not the cause of the U.S. trade deficit with China because real life complications prevent the materialization of the effect of exchange rate on trade balance.