Trade adviser turns on Trump over his China currency U-turn
- Author: Megan Austin Apr 17, 2017,
Apr 17, 2017, 4:40
In a semiannual report on America's major trading partners published late Friday, the Treasury Department declined to label any country a currency manipulator, though it kept China, Japan, Korea, Taiwan, Germany and Switzerland on a previously established "watchlist" of countries that merit close attention for their currency practices.
China, Japan, South Korea and Taiwan remained on a list for special monitoring of currency practices, China by virtue of a massive trade surplus with the United States.
Many economists have argued that the Chinese currency, RMB, has been at equilibrium level in recent years.
Trump, in a Wall Street Journal interview, said China had not manipulated the yuan for months, while accusing nations that he didn't identify of devaluing their currencies and saying the United States dollar is getting too strong.
"They're not currency manipulators", he said.
The semi-annual US Treasury currency report released today did not name any major trading partner as a currency manipulator, although it seemed to leave open the option for action in the future.
"Expanding trade in a way that is freer and fairer for all Americans requires that other economies avoid unfair currency practices, and we will continue to monitor this carefully", Mnuchin said.
Still, despite that reversal, the report said a decade of holding down the renminbi had imposed "significant and long-lasting hardship on American workers and companies" and left China with the largest trade surplus of any country against the United States - $347 billion past year.
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"I think the United States made a decision to forego (labeling 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.
Treasury hasn't branded any nation a currency manipulator - a highly charged assertion - since the Clinton administration labeled China as such in 1994. The Treasury did not alter its three major thresholds for identifying currency manipulation put in place a year ago by the Obama administration: a bilateral trade surplus with the United States of $20 billion or more; a global current account surplus of more than 3 percent of gross domestic product, and persistent foreign exchange purchases equal to 2 percent of GDP over 12 months.
"They're not currency manipulators", Trump told The Wall Street Journal in an April. 12 interview, adding that China hasn't been manipulating its currency for months and that labeling China a manipulator could discourage the country from helping the United States with North Korea.
Trump has said some USA trading partners, particularly China, manipulated their currency, but has since backed off that claim and acknowledged that China had not weakened the yuan to make its exports cheaper.
Trump has softened his rhetoric against China's trade practices as Beijing has intervened in foreign exchange markets to prop up the value of its yuan, and as he looks to China for help dealing with rising tension on the Korean peninsula.
This was the Trump administration's first release of the twice-yearly report, which evaluates the foreign exchange policies of major US trading partners.
Trump's policy reversal on China sends a signal to global finance chiefs ahead of next week's meeting in Washington, D.C., that Trump could soften the aggressive trade positions he staked out during his campaign.
"The basic message is that Japan needs to expand its domestic demand and one can read this as them telling Japan to import more American goods", said Minami of the Norinchukin Research Institute.