Tourism Stimulus

Chinese manufacturing is more likely to compete with low-wage manufacturing in other developing countries than it is to compete directly with U.S. manufacturing. Still, as Paul Krugman explains, that doesn’t mean that currency realignment wouldn’t alter our trade balance. One mechanism Krugman doesn’t mention is that a pricier RMB would mean higher incomes for Chinese people. That means they’d buy more American stuff. That’s not just export-oriented U.S. manufactured goods, its also our bounty of agricultural exports and even things like taking more trips to the United States and buying stuff while they’re here. Net tourism is an important and growing export industry for the United States, and serves as a valuable form of stimulus for the large majority of Americans who don’t work in the manufacturing trade. Stronger foreign currencies mean more demand for our hotels, our restaurants, and our transportation system as well as for our manufactured goods.