Monetary policy and trade barrier

Monetary policy targets at the supply of money and always affect the policy related to interest rate. For international trading, it is also a significant factor of foreign exchange market changes. So one country's monetary policy always be seen as an unintended trade barrier for other countries.

For the United States, the Fed has been with a loosening monetary policy for a long time now. This monetary policy leads to the fact that the U.S keeps a very low interest rate. It helps the country to increase investment and try to make the weak economy into a good track. The QE1, QE2, and the coming QE3 are all for the same purpose.

However, this loosening monetary has already been seem as a trade barrier for many countries. Take China for example, the Chinese government concerns about this seriously. According to the U.S Treasury, China were holding 1,173.5 billion dollars in July, 2011. The loosening monetary policy in America leads to a fact that the U.S dollars are keeping depreciating. It means that the value of the U.S debts China has, is shrinking every day. So the Chinese are actually losing money from America's monetary policy and it hurt the country's exports so badly. The same thing also happens to America's alliances like EU and Japan too. As a result, many countries in the world would argue America's loosening monetary policy as an unintended trade barrier.