[Erik Latranyi]

The trade deficit is not the cause of our economic malaise. Protectionism will only make matters worse.

Generally, you are correct. However, specific to China, you are wrong.

A LESSON:

Free trade means floating currencies. If a country imports more than it exports, its currency devalues, which drives the prices of imported goods up.

China does not let its currency float. They peg it to the dollar, which keeps their prices artificially low.

China should be penalized for this.

Other countries that do not do the same should not get penalized.

[Hoodat]

If a country imports more than it exports, its currency devalues, which drives the prices of imported goods up.

That is false.

China does not let its currency float. They peg it to the dollar, which keeps their prices artificially low.

This is no longer true. The Yuan is not pegged to the dollar. My wife just returned from a trip to Beijing. The dollar is now worth less. Prices in dollars there have increased there by around 50%. I was expecting to get my usual $50 watch, but now they cost $75.