The results of the Pew Survey, recently cited in the Financial Times, capture the essence of the tension between the U.S. and China. The survey found that a majority of Americans believe the Chinese economy is larger than the U.S. economy. Not only is that patently untrue, but it is not even a close call. The U.S. economy is more than three times as big in nominal terms and is still likely close to twice as large at some measures of fair value.With high U.S. unemployment, high stakes in the November election and genuine frustration over a range of economic and political issues, the U.S. Congress is once again taking up the China issue. Yet imagine the upcoming sequence of events. Around April 10, the PRC will report March trade figures. A number of high-ranking PRC officials have hinted that a deficit may be reported. Now, of course, no one believes that if a trade deficit is reported, it really reflects underlying trends. Instead, the data may be skewed by a number of factors that are unlikely to be sustained, but it may very well be a deficit nonetheless. Within a week of those figures, the U.S. Treasury is expected to make its semiannual report about manipulation in the currency market. No country has been cited by the U.S. for several years, but there is a risk that the Obama Administration cites China this year. The Obama administration appears to be edging toward a confrontation. Obama himself has warned as much. But as is often the case, the foreign policy is also about domestic politics. By taking a tougher stance toward China, Obama will find support among both parties in Congress and may help garner support for the other free-trade agreements pending. Yet if the U.S. does cite China as a manipulator in the foreign exchange market, China could very well cancel the Strategic Economic Dialogue talks scheduled for May and further strain the already precarious relationship. Ironically, fixed exchange rates used to be the orthodoxy and even today, free floating exchange rates appear to be the rare exception. Fixed exchange rates cannot be tantamount to manipulation.