The second fact is that currency misalignment — not trade deals — is the single most important driver of growing United States trade deficits. From 1997 to 2014, China purchased $4 trillion in United States Treasury bills and other assets to bid up the value of the dollar relative to the Chinese yuan. (China sold some of its reserves in 2015 and 2016 to stabilize the yuan, but this year it again bought foreign assets to keep the yuan from rising.) This has made China’s currency artificially cheap, creating what is effectively a huge subsidy for Chinese exports to the United States. It also imposes a de facto tax on all United States exports to China.

China is not the only country doing this. Between 2006 and 2013, central banks in roughly 20 nations including China financed virtually all of America’s trade deficit. Growing United States trade deficits with these countries now account for most of the five million manufacturing jobs — and nearly 90,000 factories — lost in the United States in the past two decades. As my latest research demonstrates, trade with China alone has eliminated 3.4 million jobs in the United States since 2001, affecting every state and congressional district. Notably, the hardest-hit industry was not toys or apparel, but computers and electronic parts — long thought to be a source of America’s competitive advantage. It lost 1.2 million jobs.

Growing trade with low-wage countries like China has decimated the earnings of 100 million non-college-educated workers in the United States — two-thirds of the work force. And job losses have devastated entire regions of America’s industrial heartland, especially in the upper Midwest. Not surprisingly, this includes some of the once reliably Democratic states that President Trump carried in the last election.

Although China is no longer officially manipulating the value of its currency, the dollar remains significantly overvalued — in part because China is sitting on more than $3 trillion in foreign assets. The dollar is now overvalued by at least 25 to 30 percent against not just the Chinese yuan but also the Japanese yen and the euro. Notably, the dollar has risen further since Mr. Trump was elected, increasing roughly 6 percent in trade-weighted value since January 2018 alone, which further encumbers domestic manufacturers.

Unfortunately, currency misalignment can’t be fixed by updating trade deals. It’s a global problem driven largely by continuing foreign demand for United States securities and financial assets. Since 2014, private foreign investment in American financial assets has increased the dollar’s real, trade-weighted value by 20 percent. The dollar must be realigned against not just the Chinese yuan but also against the currencies of countries that have been running chronic trade surpluses for many years.