Trump admin. declines to brand China a currency manipulator

Apr 16, 2017, 02:27
Trump admin. declines to brand China a currency manipulator

One of Donald Trump's most prominent trade advisers has rounded on the president for his U-turn on branding China a currency manipulator.

"I think the United States chose to forego (labelling China a currency manipulator) this time because it wants China's cooperation on North Korea", said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. The countries - China, Japan, Germany, South Korea, Taiwan and Switzerland - were the same six named in the last currency report issued by the Obama administration in October.

Speaking with the Journal, Trump said he changed his mind because China hadn't been manipulating its currency for months, and that such a move could harm ongoing talks with Beijing on containing the nuclear threat from North Korea.

Economists and business leaders had said that China wasn't manipulating its currency.

Presidents have often used these semiannual reports as a diplomatic tool while engaging with countries that are seen as having exchange rate policies that harm U.S.jobs and economic growth.

The Treasury report said that for a decade China engaged in one-way large-scale interventions to hold down the currency, and then only allowed it to strengthen gradually - a practice that imposed "significant and long-lasting hardship on American workers and companies".

The US Department of the Treasury has kept Taiwan on its "currency monitoring list" as Washington on Friday released its Foreign Exchange Policies of Major Trading Partners of the United States report.

US business wary of skin-deep results from Trump-Xi trade talks
Recent satellite imagery suggests the country could conduct another underground nuclear test at any time. The Pukkuksong submarine-launched ballistic missiles (SLBM) were also on parade.

And although the administration's first report to Congress on the foreign exchange policies of U.S. trading partners continues the stance of the Obama administration, putting six countries with troublesome policies on a watch list, it takes a much tougher tone.

Economists agree that China doesn't now merit the label of currency manipulator, and has not engaged in the practice for several years.

He said China may not be manipulating their currency "at the moment because it doesn't suit their economic needs" but "make no mistake about it, as soon as the tide turns they will", he said, adding that the Trump has given them a "green light to steal our jobs".

A currency manipulator designation is largely symbolic and triggers negotiations between the United States and any country determined to be manipulating its exchange rate.

The U.S. report said Asia's fourth-largest economy posted US$28 billion in goods surplus with the U.S. last year, with its current account surplus accounting for 7 percent of the country's gross domestic product. The countries agreed to a 100-day plan for trade talks to boost USA exports to China, and China said it was willing to offer US companies greater access to its markets for beef and financial services.

"China will need to demonstrate that its lack of intervention to resist appreciation over the last three years represents a durable policy shift by letting the RMB (yuan) rise with market forces once appreciation pressures resume", the report said. Germany, South Korea and Switzerland should increase public borrowing to support domestic demand for goods and services, the report suggested.