Tariffs won't fix trade woes

China has hit upon a diabolical means of undermining the world's only superpower. Its strategy? Sell us things at amazingly low prices and then loan us back what we paid, interest-free, so we can buy more.

If this doesn't sound like such a bad deal, that's because it benefits consumers and businesses in both countries. Indeed, all over the developing world, nations have been exporting their way out of poverty, and American consumers have been soaking up what they sell.

The problem is that the United States imports far more than it exports, and our trade deficit with China has exploded in the past two decades. Some people, moreover, benefit a lot more than others. International trade contributes to income inequality in this country, even as it reduces it between countries. The sufferings of blue-collar Americans in industrial parts of the country are particularly apparent now, when few other jobs are available.

To address this, Sen. Charles Schumer (D-N.Y.) and others are pushing legislation that would force the government to punish China with trade tariffs if it's officially found to be manipulating its currency to its own advantage. In fact, that's just what China does, intervening in currency markets to keep the yuan artificially low. A stronger yuan would make imports from America cheaper -- not just in China but in much of Asia, since others in the region hold their currencies down to compete with China.

Schumer has been seeking such a measure for years. According to C. Fred Bergsten, director of the Peterson Institute for International Economics, a 20 percent appreciation in the yuan should yield a $50-billion to $100-billion reduction in our current account deficit, which last year was $471 billion.This combination of fewer imports and more exports could mean up to 600,000 additional American jobs, Bergsten has said.

Unfortunately, Schumer's bill is unlikely to help much even if it becomes law -- which it just might this time around, given the issue's political potency. A stronger yuan might well create jobs, but in other, even cheaper countries, such as Bangladesh, while leaving American employment and trade deficits unchanged. Besides, to have a real impact any tariffs would have to be huge. That could set off a destructive trade war. A stronger yuan would make Chinese goods more expensive, but domestic substitutes would cost more as well. In other words, punishing China for its currency shenanigans isn't easy. And if we succeed, we'll be imposing higher prices on ourselves.

The Chinese, under pressure, have already let their currency begin to rise. And Chinese wages are soaring, helping to erode the nation's cost advantage. In the long run, much of the developing world's cost edge will evaporate as affluence increases.

Sooner or later China will have to loosen its grip over the flow of money into and out of the country, allowing the yuan to find its own value and join the dollar and the euro as an international currency. But meanwhile, cutting trade could make us poorer by making many things more expensive, making some firms less competitive, and killing some jobs even as it saves others. Politicians know this, which is why Congress is rightly working to pass free-trade pacts with Colombia, South Korea and Panama.

What we really need is to focus on the woes of Americans hammered by imports -- a group likely to grow thanks to the Internet, which makes it possible to do many more jobs remotely. Economist Alan Blinder figures one in four American jobs can be moved offshore in the next decade or two, including millions of white-collar jobs.

To deal with this, we'll need more and better retraining. We'll also need to decouple medical insurance and pensions from work. And we'll need to reform education to emphasize skills that either can't be exported -- like fixing cars -- or that play into America's competitive strengths in technology, access to local markets and cultural knowledge. Finally, Americans will have to consume less and save more, as they've recently begun doing, to pay for all those imports.

Ultimately, free trade isn't sustainable if it's too one-sided. It's time for the Chinese to become more avid consumers -- and develop a stronger taste for American foods, films and financial services. A little New England clam chowder might be just the thing on a cold night in Beijing.