Treasury Opts Against Labeling China a Currency Manipulator

Hits: 9

WASHINGTON — The Trump administration is eagerly embracing a trade war with China, but on Wednesday, it opted once again not to label that nation a currency manipulator despite President Trump’s repeated complaint that Beijing is weakening the renminbi.

The Treasury Department’s biannual currency exchange report, the fourth of Mr. Trump’s presidency, criticized China’s trade and currency practices but still did not conclude that the Chinese government was improperly devaluing the renminbi. Doing so would have significantly ratcheted up tension between the United States and China; however, its status remained unchanged largely for technical reasons.

The Treasury Department determined that China’s direct intervention to reduce the value of its currency had been “limited,” but it said Beijing’s practices deserved scrutiny.

“Of particular concern are China’s lack of currency transparency and recent weakness in the currency,” Steven Mnuchin, the Treasury secretary, said in a statement. “These pose major challenges to achieving fairer and more balanced trade, and we will continue to monitor and review China’s currency practices, including ongoing discussions with the People’s Bank of China.”

Along with China, the Treasury Department said that Germany, India, Japan, Korea and Switzerland would remain on its “monitoring list” for potential manipulation.

The renminbi has fallen 6 percent against the dollar this year, raising concern that the Chinese government is intervening to help make its exports cheaper in the face of Mr. Trump’s tariffs on $250 billion worth of Chinese goods. On Friday, Mr. Mnuchin warned China to refrain from weakening its currency and suggested that any trade deal between the two countries should contain measures to prevent manipulation of the renminbi.

The Treasury Department determines whether a country should be labeled a currency manipulator based on bilateral trade deficits and signs that a country is depressing its currency. The United States has not officially designated another country a manipulator since it assigned that label to China in 1994. Doing so is supposed to prompt negotiations to resolve the problem.

The report comes as the United States and China have been locked in stalled trade discussions for months with little sign of an imminent breakthrough.

Ahead of a cabinet meeting at the White House on Wednesday, Mr. Trump said that China was not ready to make a deal.

“It’s hard for them,” he said. “They’ve had it so good for so long.”

Mr. Trump has threatened to impose more tariffs on China if it does not make concessions soon, including backing down from a plan to dominate industries of the future through an initiative known as “Made in China 2025” and pressuring American companies to hand over valuable technology as a condition of doing business there. The president has warned that he could slap taxes on the entire $500 billion worth of goods that America imports.

Administration officials have been watching the movements of China’s currency this year and expressed growing concern as its value against the dollar has declined about 6 percent since January. A weaker renminbi mitigates the impact of Mr. Trump’s tariffs by making Chinese exports cheaper.

The Treasury report notes that, through June of this year, China had a $390 billion goods trade surplus with the United States, making it the largest such gap of any major trading partner.

Mr. Trump has repeatedly accused other countries of currency manipulation, most recently in an August interview with Reuters.

“I think China is manipulating their currency, absolutely,” Mr. Trump said. “And I think the euro is being manipulated also.”

As a presidential candidate, Mr. Trump called China the “greatest currency manipulators ever” and promised to take action if elected.

Last week, Mr. Mnuchin said that he discussed the renminbi’s recent weakness with Yi Gan, the governor of the People’s Bank of China, during the annual meetings of the World Bank and International Monetary Fund in Indonesia.

“I expressed my concerns about the weakness in the currency and we also talked about what would be a pathway to getting a more balanced trading relationship,” Mr. Mnuchin said.

Mr. Trump and President Xi Jinping of China are expected to meet in Argentina next month at the Group of 20 summit meeting. The prospect of a face-to-face meeting between the two leaders has raised hopes that there could be a breakthrough in the trade dispute.

But some members of Mr. Trump’s economic team are tempering their optimism.

Larry Kudlow, the director of the National Economic Council, said on Wednesday that the Chinese government had shown an unwillingness to negotiate on issues such as intellectual property theft and the forced transfer of the technology of American businesses looking to do business in China.

“China is a problem,” Mr. Kudlow said on the Fox Business Network. “They have not responded to our asks.”

Go to Source