It’s fitting that Commerce modified its regulation to account for a possible new form of benefit‐​conferring subsidization but then refused to even consider that its new approach warrants a whole new set of potential offsets. To be fair, Commerce doesn’t have the authority to change the law. But it should at least be honest about the concerns.

Moreover, countervailing duties would address only the export subsidy portion of the distortion, leaving in place the import tax effect of the currency manipulation, even magnifying its adverse impact on U.S. exporters by keeping foreign products that would have been bound for the United States, if not for the countervailing duty, in the foreign market, increasing the supply and suppressing prices. There might also be overt retaliation. U.S. exporters, in other words, would get no relief and, in fact, would be punished by CVD measures.

Finally, if a currency’s true market value is determined by the intersection of its supply and demand curves, it is important to recognize that those curves (their shapes and positions) are affected by underlying economic activity, as well as public policy—monetary, fiscal, and regulatory. In other words, currency values reflect all sorts of policy decisions that it would be improper to indict direct manipulation occurring through currency market interventions, but not indirect manipulation delivered through other policy channels. After all, it is the effect of policy and not its intent that matters to the real economy.

Allowing the Commerce Department—especially THIS Commerce Department—these new authorities is something we will soon regret.

This article by Daniel J. Ikensen first appeared at CATO.