WASHINGTON – In the latest chapter of an escalating trade war with China, President Donald Trump is again accusing China of manipulating its currency to gain trade advantages. In doing so, he’s misrepresenting the facts.
Trump has been making a charge of currency manipulation since the 2016 presidential campaign, even promising to take action against China right after taking office.
Trump’s latest complaint in tweets Monday came after China allowed its currency, the yuan, to fall below the seven yuan to $1 level for the first time in 11 years.
TRUMP: “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!”
TRUMP: “Historic currency manipulation by China.”
THE FACTS: Trump is correct to be worried that China may decide to use its currency as a weapon in its ongoing trade war with the United States. But it is Trump’s own Treasury Department which has failed to cite China as a currency manipulator in five reports it has issued since Trump took office.
A weaker yuan would make Chinese goods less expensive in the United States, potentially offsetting some of the impact of the tariffs Trump has already imposed on $250 billion in Chinese goods and is threatening to widen to another $300 billion in goods next month. Those U.S. tariffs drive up the cost of Chinese imports to American consumers.
Trump seems to blame the Federal Reserve for not taking action against China in the currency area. In reality, the Treasury Department’s report, which comes out every six months, has repeatedly said that China does not meet the requirements established in U.S. law to be branded a currency manipulator.
Trump’s mention of the Federal Reserve could also be an effort to pressure the central bank to lower its benchmark interest rate further. It cut the rate for the first time in more than a decade last week, and many analysts believe it will cut rates again in September to keep the fallout from a trade war from derailing the U.S. economy.
Falling U.S. interest rates can put downward pressure on the dollar’s value against other currencies. A weaker dollar could boost U.S. export sales.