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Macroscope | US Treasury says China is not manipulating the yuan. Trump says it is, and he may win
Neal Kimberley says China is not a currency manipulator by the US Treasury’s own criteria, but politics may dictate that the US formally classifies Beijing as one. Such a move would exacerbate the already tense China-US relationship
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Why you can trust SCMP
US President Donald Trump might regularly assert that China is a currency manipulator but the US Treasury has yet to make that categorisation in its key semi-annual report to Congress, on the “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States”. But with the next report due next month, there’s a material risk that the US Treasury will now take that step.
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Such a categorisation would only add to the tension in an already strained China-US economic relationship, as Washington would then be obliged to seek bilateral negotiations with Beijing over the issue, and although Trump could ultimately deploy a waiver, if no solution was agreed within one year, the US administration would be required to adopt measures that would result in “remedial action”.
It’s definitely not a step Washington should take lightly but if the Trump administration does want to categorise China as a currency manipulator, then the occasion of the report’s publication, due at the earliest on October 15, would be the opportune moment to do so, just ahead of critical US congressional midterm elections in November.
“I think China’s manipulating its currency, absolutely,” Trump said on August 20.
Trump’s view is unchanged even though, on August 24, the People’s Bank of China reintroduced the counter-cyclical factor, which in current circumstances lends itself to the calculation of a slightly stronger daily value for the renminbi.
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