President Donald Trump says China is still in his sights for currency manipulation.
On the campaign trail, Trump repeatedly criticized China for intentionally devaluing its currency to America’s disadvantage. He threatened to label China a currency manipulator on day one of his administration, but since he took office, such threats have faded from his rhetoric, causing some to assess Trump is retreating from his original position.
Even before he took office, Trump appeared to be backing down on his threats. One week before he entered the White House, Trump told the Wall Street Journal that he would not label China a currency manipulator on day one and that he did not want to take such a drastic measure against the Chinese.
“Certainly they are manipulators. But I’m not looking to do that,” then president-elect Trump told reporters.
In an exclusive interview with Reuters Thursday, Trump stressed that he is not holding back.
“I think they’re grand champions at manipulation of currency,” the president explained. “I haven’t held back.”
“We’ll see what happens,” he added.
Trump’s comments on China came shortly after Secretary of the Treasury Steve Mnuchin told CNBC that he was hesitant to label China a currency manipulator.
“We have a process within Treasury where we go through and look at currency manipulation across the board. We’ll go through that process. We’ll do that as we have in the past,” he told reporters. “We’re not making any judgments until we go continue that process.”
China was last labeled a currency manipulator by the U.S. in the 1990s.
China responded to Trump’s criticisms Friday by calling the president’s accusations unfounded.
“China has no intention of seeking foreign trade advantages via an intentional devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi,” Ministry of Foreign Affairs spokesman Geng Shuang told reporters during the daily press briefing. “If you must attach the label ‘grand champion’ to China, then I think China is a grand champion. But we are the grand champions of economic development.”
China intentionally manipulated its currency for years, purchasing foreign currencies, U.S. dollars in particular, to artificially devalue the Chinese renminbi (yuan) to give it an advantage.
And, as China’s economy grew stronger, it allowed its currency to appreciate to a certain extent.
But, China’s growth is slowing. Companies are investing overseas, capital is leaving the country, and the Chinese yuan is plummeting. Evidence suggests that China is now draining its foreign exchange reserves to purchase more yuan in a desperate attempt to keep its currency from sliding further.
Some observers argue that if China were to let the value of its currency move freely in relation to market shifts, the value of the yuan might drop even faster.
Trump, however, asserts that China is definitely engaging in underhanded trade practices. The U.S. has a trade surplus with China of roughly $350 billion.
“It’s not dropping. They are doing it on purpose,” Trump previously said of the Chinese yuan.
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