“Free trade” really sucks when the other nations are practicing mercantilism at the time.
China is the master of it, and ruthless to boot. They deserve to be kicking our asses. We were pretty ruthless for a while, then got soft. China is absolutely ruthless, from piracy to fraud. They really know how to come out ahead.
Only if mercantilism works. Yes, I'm referring to mainland China. Their industrial sector is on amphetamines thanks to that currency manipulation. Because of the way the People's Bank of China is set up, the massive U.S. dollar reserves are part of the monetary base. In other words, those funds can be used to inject more yuan into the Chinese economy. Result: inflation.
In a mercantilistic economy like mainland China's, the inflation takes the form of capital-goods inflation. More machinery and factories are built than are needed. This is the worst kind of inflation, long-term, because it looks self-sustaining. In fact, it leads to an overproduction crisis.
Once the bubble bursts, China's going to be hit much harder than the States. Their economy will come close to collapsing in a deflationary depression, which Japan's came close to doing in the last two decades.
Speaking of Japan, the free traders missed the ball. They should be saying, "That's what you get for mercantilism: the Lost Decades. You can 'thank' your government's industrial policy for the mess you're in."