China Central Bank allowed the US dollar to weaken drastically in the country in a move that has seen the leader of the Free Nation, Donald Trump designate China as a leading global currency manipulator amid the ongoing trade dispute.
The move comes hours after Trump accused Beijing of depreciating its currency on Twitter, adding later that such measures have been used to “steal our business and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!”
China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
The People’s Bank of China allowed its currency to fall below 7 yuan to the American dollar, which is considered to be a psychologically important marker, for the first time in a decade. The move was seen as a retaliatory measure following Trump’s threat to slap a 10% tariff on $300 billion of Chinese goods.
The yuan’s depreciation comes amid a longstanding trade war between Washington and Beijing as each side has slapped economic penalties alongside on-again, off-again negotiations.
Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the Tariffs – they are being paid for compliments of China, and the U.S. is taking in tens of Billions of Dollars! China has always….
— Donald J. Trump (@realDonaldTrump) August 5, 2019
Presidents have often used the twice-a-year currency report as a diplomatic tool while engaging with countries that are seen as having exchange rates that harm US jobs and economic growth.
This Trump’s labeling China as a currency manipulator is the second to ever been declared bu US administration. The First time a country was designated was in the early 1990s during the reign of retired President Bill Clinton.
Trump’s labeling won’t directly affect China, at least for now, but this is going to poor mud on Chinas reputation all over the globe and China might face the indirect penalties through the scare and dare tricks the US administration will impose on other governments that will, if at all they are serious, see it as a provocation.
However, the United States Treasury has declined to label China a currency manipulator, despite Trump’s pledge to do so during his vocal 2016 campaign. Instead, the country was placed on Treasury’s monitoring list in its review of US trading partners along with eight other countries.
The US Treasury reports highlighted significant concerns over the depreciation of China’s currency against the US dollar, a critical component of ongoing trade talks, and urged China to take steps to avoid what was termed as a “persistently weak currency.”
On Monday Treasury said China’s central bank openly acknowledged that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis, pointing to an earlier statement released by the People’s Bank of China.
The PBOC’s statement noted that it “has accumulated rich experience and policy tools, and will continue to innovate and enrich the control toolbox, and take necessary and targeted measures against the positive feedback behavior that may occur in the foreign exchange market.”
Trump has repeatedly argued that the Chinese have depreciated their currency slowly in the last year to help offset tariffs on billions of dollars of Chinese goods amid an ongoing trade war between the two major economic superpowers.
