Contrary to Romney’s suggestion, the law doesn’t actually give the president authority to immediately impose punitive tariffs on manipulators, and the Economic Policy Institute has suggested that such a move would violate U.S. commitments under the World Trade Organization, which require that trade spates be worked out through the organization’s the dispute settlement mechanism — potentially a years-long process.
Romney’s move might carry more firepower if Congress were to pass the Currency Exchange Rate Oversight Reform Act of 2011, a bill that would deem currency manipulation a form of subsidy and require the Commerce Department to consider what tariffs could be issued in the response. Perhaps ironically for Romney, the bill, which has already passed overwhelmingly in the Senate, was sponsored by Ohio Democrat Sherrod Brown — one of the Senate’s most liberal members — but faces opposition in the House from Republican leaders John Boehner and Eric Cantor.
Of course, just because the legal ramifications of the manipulator label are unclear doesn’t mean the political consequences wouldn’t be major. Romney’s comments last night were enough to prompt threats of a currency war in China’s state media. Such a move on “day one” of the Romney administration would certainly send a message — but more of a symbolic than a legal one.