The Obama administration has long complained that China's undervalued currency keeps prices of its exports low,putting U.S.manufacturers at a disadvantage.But China's inflation woes are changing this dynamic.As Chinese goods get more expensive,this improves the"relative competitiveness"of U.S.products,says Jing Ulrich,managing director of JP Morgan's China equities and commodities.

Since June,when the Chinese government announced a more flexible exchange rate,the yuan has risen 3% against the dollar.Adjusted for inflation,the yuan has appreciated even more,given that annual inflation in China is slightly more than 5%,and it was 1.5% in the U.S.last year.

"It's Economics 101,"says Stephen Green,head of greater China research at Standard Chartered."The exchange rate could appreciate in two ways:Either the market rate goes up or inflation goes up."

U.S.Treasury Secretary Timothy Geithner,speaking last week at Johns Hopkins School of Advanced International Studies,said that if this appreciation continues,it would help correct"a major distortion for the Chinese economy and the global economy."

High inflation in China"takes some pressure off the U.S."to push for a revaluation of the yuan,says Michael Lieberman,a fellow at the Truman National Security Project,a Washington,D.C.,group.

In the U.S.,soybean and corn growers are already seeing higher demand for their crops.Weather disruptions have stoked global demand,but China's inflation rate is accelerating the phenomenon.As China stockpiles corn and soybeans to keep domestic prices down,it's pushing up global crop prices.

In the short run,high prices benefit U.S.farmers.The concern,says Kirk Leeds,CEO of the Iowa Soybean Association,is"if corn and soybean prices get too high,demand in some markets will indeed fall."

U.S.consumers also have cause for concern about China's high inflation rate.As prices rise in China,U.S.companies that make goods there will feel pressure to pass along increases to American consumers.Yet,how high prices will climb—when U.S.unemployment is at 9.4%—remains to be seen.

"I'm skeptical we're going to see dramatic changes,"says Joe Borich,president of the Washington State China Relations Council.

Price increases are a"last resort,"says Kevin Burke,CEO of the American Apparel&Footwear Association.Still,consumers are likely to see some this year as U.S.companies hit a"tipping point"due to rising commodity,manufacturing and labor costs in China and elsewhere,Burke says.