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How Not to Fight a Currency War

Branding China a “Currency Manipulator” Will Only Hurt the United States

A Chinese yuan note as seen in May 2017 Thomas White/REUTERS

Earlier this month, the United States officially branded China a currency manipulator. Trade hawks have long argued that Washington should call out Beijing for holding down the value of its currency in order to unfairly boost its exports. But ironically, U.S. President Donald Trump picked a time when China wasn’t actually suppressing the yuan to formally brand it a manipulator. Although it has certainly manipulated its currency in the past, China stopped doing so in 2014. Yet Trump, upset by the yuan’s depreciation during the first week of August and frustrated by a lack of progress in U.S.-Chinese trade talks, reportedly pressed Treasury Secretary Steven Mnuchin to make the designation over Mnuchin’s own objections.

The designation is largely symbolic. Under the legislation cited by the U.S. Treasury Department, the penalty will be a year of negotiations between the United States and China, either directly

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