US Treasury Secretary Steven Mnuchin issued a statement on August 5, announcing that China will be recognized as a currency manipulator. Washington will work with the International Monetary Fund (IMF) to eliminate unfair competition in Beijing. This is the United States has made relevant decisions again since 1994.
The U.S. Treasury Department said that the People’s Bank of China’s statement on the 5th proved that the Beijing government fully controlled the RMB exchange rate. At that time, the PBOC expressed its experience and ability to maintain the smooth operation of the foreign exchange market and maintain the renminbi at a reasonable and balanced level.
Washington believes that China’s actions violate the G20’s commitment to avoid currency competitive devaluation. The Ministry of Finance expects Beijing to abide by these commitments and will not use the RMB exchange rate for competition.
US law confirms that the major trading partners have three major criteria for handling problems, including a surplus in the global current account, a large bilateral trade surplus with the United States, and continued unilateral effects on the foreign exchange market. Once Washington has determined that the country concerned is a currency manipulator, the Ministry of Finance will hold negotiations with relevant countries to discuss amendments, otherwise the country may face sanctions.
The United States accused South Korea and Taiwan of manipulating the exchange rate in 1988, and China faced the same allegations in 1994. This time, the Donald Trump government decided that the US-China trade issue is in a stalemate, and this will lead to an escalation of the trade war.
The United States wants to list other countries as currency manipulators. It needs to meet three specific conditions . First, the trade surplus with the United States reaches more than 20 billion U.S. dollars per year. Second, the current account surplus of the economy accounts for more than 3 of the total domestic production (GDP). Third, the exchange rate trading does not respect the market mechanism. For example, continuous one-way purchase of foreign assets causes the domestic currency to depreciate, and the ratio of total annual purchases to GDP is more than 2%.
Trump: China gets a lot of money from the US
Shortly before Mnuchin announced the decision, President Trump sent four consecutive posts on Twitter, criticizing China’s attempt to obtain hundreds of billions of dollars from the United States by manipulating exchange rates and unfair trade practices. Money, the situation should have stopped many years ago.
The yuan fell below 7 against the dollar, closing at a new low of 11 years. Trump said that China has reduced the exchange rate to a near-historical low, describing that currency manipulation is a major violation. “From this point of view, everyone should now understand that tariffs are not borne by Americans but more than China. The United States is making tens of billions of dollars in revenue.”
Trump said that China has been stealing American companies and factories by manipulating the exchange rate, damaging US jobs, depressing American workers’ wages, and hurting American farmers’ incomes.