Reference no: EM132618811

For years there has been a debate related to trade between China and the United States. It is often argued that devaluation of the Chinese yuan has created some of the issues related to trade between the two countries. Labor is a key factor of production and is much cheaper in China than in the United States. If the yuan was revalued substantially and the change was enough to reduce the demand in the U.S. for Chinese goods, would the shift in U.S. demand be toward U.S. suppliers of substitute goods or towards other countries where wage rates are low relative to U.S. wage rates? Would the change of the U.S. balance of trade deficit have a major impact on U.S. productivity and jobs?