What the U.S.-China trade relationship really means

The San Jose Mercury News marks Chinese President Hu Jintao's U.S. visit with an article titled, "China's economy merges with U.S. in countless ways." Among the astute observations: U.S. companies drive up the trade deficit by manufacturing their goods in China for consumption in the United States.

By encouraging foreign investment and making its marketplace so attractive to the Intels and the Hewlett-Packards, China finds itself besieged by multinational corporations and smaller manufacturers eager to set up plants, hire workers and carve out their presence, or export from these factories back to the United States. You may pay Apple for your shiny new PowerBook G4, but the machine itself was assembled in China.

Because of this, experts quoted say protectionist measures against China--demanding their government to more drastically revalue it currency, for example--wouldn't really be addressing the root cause of the trade deficit. Furthermore, a stronger Chinese yuan means U.S. government debt is less competitive, which means a possible interest rate spike in the United States. That could burst the housing bubbles in many markets, including Seattle. Oh, what to do? What to do?