Treasury Says China Isn’t a Currency Meddler, After Trump Reversal

April 18, 2017

It is an about-face by a president who, as recently as this month, called the Chinese “world champions” at currency manipulation.

[April 14th, 2017 [The New York Times]

WASHINGTON — The Treasury Department officially declined on Friday to label China a currency manipulator, breaking one of President Trump’s most prominent campaign promises.

In its exchange rate report to Congress, the Treasury said that in spite of China’s large trade surplus with the United States, it was not acting improperly to depress the value of its currency.

Mr. Trump signaled this week in an interview that he was reversing his position, and he has taken a less confrontational stance toward China since meeting with President Xi Jinping this month.

The report did take a more pointed tone toward China than in previous years, calling on Beijing to act to reduce trade imbalances and open its markets to American goods and services. It also said that the United States remained poised to act if China did start to meddle with its currency, as it did in the not-too-distant past.

“China will need to demonstrate that its lack of intervention to resist appreciation over the last three years represents a durable policy shift,” the report said.

A currency manipulator designation is largely symbolic and starts negotiations between the United States and any country determined to be manipulating its exchange rate.

Mr. Trump’s about-face was notable because of how forceful he was in his insistence as recently as this month that China was a currency manipulator.

Mr. Trump told The Financial Times that the Chinese were “world champions” at currency manipulation. He said previous American presidents “haven’t had a clue” about how to deal with it.

Mr. Trump also made the issue a staple of his campaign speeches. In accepting the Republican nomination last summer, Mr. Trump called China the “greatest currency manipulators ever!”

Upon announcing his candidacy in 2015, Mr. Trump said that China’s currency practices were making it impossible for American companies to compete and declared, “They’re killing us.”

In the Trump campaign’s “contract” with American voters he promised, “I will direct the Secretary of the Treasury to label China a currency manipulator” in the first 100 days of his presidency.

The Treasury report was being awaited with great interest until Wednesday, when Mr. Trump offered a preview in an interview with The Wall Street Journal. He said he had changed his mind on China.

“They’re not currency manipulators,” he said.


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  • James Crawford
    The prevailing view of the critics of Free Trade in the United States today is that our trade deficit is the result of the unfair to downright despicable business practices of other nations; with China being the exemplar of moral vileness. As a consequence the prevailing wisdom focuses on blaming others for our problems and demanding that other nations change their behavior.

    This about face by the Trump Administration with regard to China’s currency manipulation should give the advocates of this prevailing view pause and present an opportunity for them to reconsider this line of critique.

    Moral relativism is a frowned upon perspective. Surely the truths we hold to be self-evident must surely be so. But is there no limit to the list? Mainstream American economists have successfully tacked on Free Trade and their critics stop short of questioning this assumption. Consequently they stop short of focusing on making changes in our behavior the first order of business.

    I like, admire, and respect the life’s work of critics such as Peter Navarro and Dan DiMicco. But I believe they should address this stunning reversal by the Trump Administration and present their reasons for continuing to focus on attacking China rather than reforming ourselves.