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Trump administration's plan on currency manipulation

February 14, 2017

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WASHINGTON—The White House is exploring a new tactic to discourage China from undervaluing its currency to boost exports, part of an evolving Trump administration strategy to challenge the practices of the U.S.’s largest trading partner while stepping back from direct confrontation.

[Bob Davis| February 13, 2017 |Wall Street Journal]

Under the plan, the commerce secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China, said people briefed on or involved in formulating the policy. U.S. companies would then be in a position to bring antisubsidy actions themselves to the U.S. Commerce Department against China or other countries.

The currency plans are part of a China strategy being assembled by the White House’s new National Trade Council, which seeks to balance the goals of challenging China while still keeping relations with the country on an even keel. To do that, measures taken against China would also apply to other nations.

The administration would avoid, at least for now, making confrontational claims about whether China is manipulating its currency for trade benefit, the people said.

The move could be a sign the Trump administration is softening its stance on China. During his presidential campaign, Donald Trump threatened to label China a currency manipulator on the first day of his administration, which he didn’t do. He also threatened to slap 45% tariffs on Chinese goods, an idea he hasn’t raised recently.

During a phone call with Chinese President Xi Jinping last week, President Trump backtracked on a threat involving the “One China” policy, which recognizes Beijing sovereignty over Taiwan. Mr. Trump said the U.S. would honor the “One China” policy, according to the White House, after he earlier threatened he might not do so unless China made big concessions on trade.

But the currency move, if put into effect, is bound to be controversial because it may violate World Trade Organization rules. Other countries are also sure to take similar measures against U.S. exports and could argue that Federal Reserve policies that weaken the dollar qualify as subsidies. The Obama administration, concerned about such consequences, decided against naming currency practices as a subsidy.

The individuals who have been briefed on the White House thinking stress that the currency plan and other changes need to be reviewed by cabinet officials including Steven Mnuchin who was confirmed as Treasury secretary late Monday and Commerce Department nominee Wilbur Ross Jr. who is awaiting confirmation.

A White House spokeswoman declined to comment. A representative for the Chinese embassy in Washington didn’t respond to requests for comment.

China’s currency practices have long been a source of controversy between the nations with the world’s two biggest economies. Twice a year, the Treasury issues a report examining whether countries pursue policies that keep their currencies undervalued. Designation as a currency manipulator is mostly symbolic. Still, it has long been seen in Beijing as a possible prelude to punitive measures, a threat that Mr. Trump made explicit in a late 2015 opinion piece in The Wall Street Journal.

The Treasury last labeled China a currency manipulator in 1994 during the Clinton administration.

A string of corporate executives have told the Trump White House that China no longer is pursuing an undervalued currency and has run through $1 trillion in foreign reserves trying to stem the yuan’s persistent decline.

In an interview with the Journal in January, Mr. Trump rejected that claim, saying Chinese leaders talk about supporting their currency “because they don’t want us to get angry.”

Currency manipulation is “not on top of agenda of the American business community in China,” said James McGregor, China chairman for APCO Worldwide, a communications and lobbying firm. Last week he visited the White House and other government offices as part of a delegation of U.S. business officials from China.

Categorizing currency manipulation as a subsidy would give U.S. companies a new measure to use in case China reverts to a more mercantilist approach. Companies routinely bring antisubsidy suits to the Commerce Department against imports which they argue are being improperly subsidized by foreign governments. If the U.S. firms prevail, Commerce often assesses heavy duties on those imports, which sharply limits imports.

“It’s a great first move,” said Dan DiMicco, former chief executive of steelmaker Nucor Corp., who has been advising the Trump team on trade issues. “It allows companies to use trade laws to consider currency manipulation, which is rampant in the world, especially in China, as a subsidy.”

Prominent Democrats, including Senate Minority Leader Chuck Schumer of New York and Ohio’s Sherrod Brown, have long argued for previous administrations to make such a change.

The Trump administration is also looking to tighten oversight of foreign acquisitions of U.S. firms that have access to important technology. The Committee on Foreign Investment in the U.S., or CFIUS, an interagency committee that reviews foreign acquisitions, would get broader scope to reject deals that threaten national interests, said individuals involved in discussions with the White House.

The White House is also examining the creation of an additional panel to look more broadly at the transfer of U.S. technology overseas, whether by acquisition, license or joint venture, these people said.

U.S. companies routinely complain that Beijing insists that they create joint ventures with Chinese firms to get access to the vast Chinese market and to give their partners access to the latest technology.

Several individuals involved in the discussions said the new panel, dubbed “SAFE,” would operate as a “free-floating” intelligence-gathering operation and be staffed by people from economic and security agencies, plus outside experts. It’s unclear how the panel would interact with CFIUS and other agencies.

Beijing has traditionally counted on American corporations to blunt U.S. government policy offensives on the Chinese economy. But that support may be weakening. According to a survey last month by the American Chamber of Commerce in China, 81% of member companies feel that foreign businesses are less welcome in China.

“The American business community in China welcomes a pushback because China has overreached,” said Mr. McGregor, the APCO official. “But it has to be smart and well thought-out and focus on real issues between the two countries, such as techno-nationalism and the step-by-step closing of market access for foreign companies in China.”


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  • And double Amen – the Free but Fair theory of trade does not work.
  • Nothing like countless lawsuits to fix an economy. Worse only companies who care to stay will fight, such as steel. No real incentive in my opinion. Only sky high tariffs can save us.