Over the last 10 years, economic issues related to currency policy have become the major ongoing dispute between China and the United States. Specifically, the US Congress has demanded a tougher policy to avert the negative consequences of “unfair” Chinese policies—in the form of a “manipulated currency”—for the US economy. Building on an analytical framework of discourse theory (DT)—and proposing a method for applying DT in empirical research—an investigation into congressional debates on the Chinese currency shows that the question is not a purely economic one, but rather that it reflects a dislocation of US identity as the vanguard of liberal‐democratic capitalism. This dislocation involves changes to how “liberal” identity in the US Congress is articulated in relation to the role attributed to “illiberal” China, which in turn affects the formulation of US China policy in Congress.