The US Treasury department recently completed its semi-annual ritual of examining whether America’s trading partners have been manipulating their exchange rates to increase their trade surpluses. Not surprisingly, the Treasury focused on China. And once again it complained that the Chinese renminbi is undervalued but stopped short of accusing Beijing of currency manipulation in order to avoid automatically triggering a penalty on China.

That ritual has been repeated for more than 20 years since Congress passed the legislation ordering the Treasury analysis. It is now time to bring it to an end.

The entire exercise is based on the false premise that the US current account deficit is caused by the exchange rate policies of foreign governments. But as every student of economics knows, or should know, the current account balance of each country is determined within its own borders and not by its trading partners.