Romney says he would designate China as a manipulator unless it stops currency manipulation by his January inauguration. Romney trade policy adviser Oren Cass said this would set a new tone and show the U.S. is willing to take China to task over a range of trade violations, including intellectual property theft and restrictions on market access for U.S. companies in China.

The designation itself would not mandate any sanctions, but would require that the U.S. hold consultations with China.

Cass said that if Beijing doesn’t move toward changing its currency policies after consultations, the U.S. could impose so-called countervailing duties on Chinese products.

But Matthew Goodman, former director of international economics in the National Security Council under Obama, said the U.S. discretion to unilaterally impose retaliatory tariffs ended when it joined the World Trade Organization in 1995, and in practice it is difficult to take a currency dispute to the WTO for settlement. Cass says that under domestic law, the U.S. could impose countervailing duties, and it’s an open legal question at the WTO whether member states can do so unilaterally to compensate for a currency subsidy.

How China would respond may be swayed by its leadership transition. The new guard would not want to appear weak. But neither would China want the dispute to escalate as it relies on exports and faces its own economic slowdown. If that translates into major job losses at home it could affect social stability, which is Beijing’s biggest concern.

Obama has consistently opted against designation of China as a currency manipulator. Like President George W. Bush before him, he has preferred to wait while economic forces encourage Beijing to allow its currency to strengthen — which it has done, although most economists still believe it is undervalued.