US President Donald Trump denounced China as “grand champions” of currency manipulation on Thursday in an exclusive interview with Reuters, despite the fact that only hours ago, his Treasury secretary had pronounced to follow required procedures to review China’s foreign exchange practices before designating it a currency manipulator.
“Well they, I think they’re grand champions at manipulation of currency. So I haven’t held back,” said Trump, “We’ll see what happens.” During his presidential campaign, Trump is known to have repeatedly accused China of manipulating exchange rate of its currency yuan against the dollar, in order to make its exports more competitive in price.
Trump had vowed to label China a currency manipulator on the first day of his office, while he finally failed to keep his word in a complicated situation. Over the past year, it is known that China’s central bank has spent billions of dollars in foreign exchange reserves to counter against yuan’s expected depreciation. Meanwhile, China’s regulators have stepped up their efforts to screen illegal capital outflow, while businesses are recommended to make more prudent overseas investment. All the efforts aim to prop up the currency.
When asked by the CNBC if the U.S. Treasury is to designate China a currency manipulator any time soon, Stephen Mnuchin, the new Treasury secretary said he would follow a normal process to review currency practices of America’s trading partners.
The U.S. Treasury would release a report on these practices on April 15 and October 15 each year. According to Mnuchin, before the April report comes out, the Treasury would not label China as a currency manipulator.
Based on the Trade Facilitation and Trade Enforcement Act enacted in 2015, the Treasury is required to evaluate if U.S trade partners’ foreign exchange policies may gain them unfair trading advantages. Once being designated a currency manipulator, the U.S. government would need to negotiate with the countries in question to improve the imbalances. If things failed to look up after one year’s intervention, the government could choose to inflict punitive tariffs on imports from those countries.
According to a readout from a Treasury Spokesperson of Secretary Mnuchin’s call with International Monetary Fund (IMF) Managing Director Christine Lagarde, Mnuchin stressed his expectation that the IMF provide “frank and candid analysis of the exchange rate policies of IMF member countries.” The international organization headquartered in Washington, D.C., reached a conclusion last year that the yuan’s value was broadly in line with its economic fundamentals.