Two U.S. senators said Thursday that they had agreed to delay a vote on a bill threatening China with steep tariffs after being convinced that China could revalue its currency soon.
Sen. Charles E. Schumer (D-N.Y.) and Sen. Lindsey Graham (R-S.C.) told reporters that they had struck a deal with Treasury Secretary John W. Snow to put their bill on hold until later this year, giving China more time to act on its own to revalue the yuan.
The senators said Snow and and Federal Reserve Chairman Alan Greenspan made a persuasive case in a meeting Thursday that China might take action soon.
“They have convinced us that the likelihood of real progress with China on currency revaluation is very real and could well occur in a very short while, in the next few months,” Schumer said after the meeting.
“We have agreed to delay a vote on our bill ... in the very real hope that China will begin a path to allow its currency to float,” Schumer said.
The legislation threatens China with a 27.5% across-the-board tariff if it does not revalue its currency, which has been pegged at 8.28 yuan to the dollar for several years.
U.S. manufacturers complain that the fixed valuation gives China an unfair price advantage of 15% to 40% in world trade.
Republican leaders previously promised Schumer and Graham a second vote on their bill by July 27 after it survived a motion to kill it in April.
In a statement after the meeting Thursday, Snow said that China had recognized the need to move to a flexible currency and that there were signs of progress.
“They have agreed that it is in their interest to adopt greater exchange rate flexibility,” Snow said.
“I believe that our long-standing efforts are beginning to come to fruition and we are making progress toward achieving this goal,” he said.
Snow has been increasingly emphatic in his demands that China move to a more flexible exchange rate, and has indicated that the U.S. could formally label Beijing as a currency manipulator this year if it does not act.
But both he and Greenspan warned at a Senate Finance Committee hearing last week that imposing a 27.5% tariff on Chinese goods would hurt the U.S. economy and send a troubling signal to the world.