Washington/Beijing | The US has officially labelled China a “currency manipulator,” accusing it of using the yuan to gain “unfair competitive advantage,” a charge dismissed by Beijing as “wayward unilateralism and protectionist”, further escalating the tense trade war between the world’s two largest economies.
The Trump administration’s move came as Beijing allowed its currency to fall below the politically sensitive level of seven yuan to the US dollar on Monday for the first time in 11 years and Chinese firms have reportedly stopped buying US farm produce.
During the 2016 presidential elections, President Donald Trump had promised to label China as a currency manipulator, but the Department of Treasury kept the country on its watchlist, declining to take the final step.
On Monday, the Treasury Department announced, “Secretary (Steven) Mnuchin, under the auspices of President Trump, has today determined that China is a ‘Currency Manipulator’.”
Mnuchin, after this decision, will engage with the International Monetary Fund to eliminate the “unfair competitive advantage created by China’s latest actions”, the treasury said.
Earlier, Trump tweeted, “China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the US with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago!”
Trump has repeatedly argued that China has depreciated the yuan 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.
In a statement, the treasury department alleged that China has a long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market.
In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past, it claimed.
“The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade,” the treasury said.
Chinese authorities have acknowledged that they have ample control over the yuan exchange rate, it added.
The treasury referred to a statement by the People’s Bank of China (PBOC) which 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 behaviour that may occur in the foreign exchange market.”
This is an open acknowledgement by the PBOC that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis, it alleged.
President Trump on Thursday announced that the US will impose an additional 10 per cent tariff on USD 300 billion in Chinese imports, as he accused China of not being serious in arriving at the trade deal and failing to keep its promise to buy more American agricultural products.
No country has officially been named a currency manipulator by the US since Bill Clinton’s administration did so to China in 1994.
In Beijing, the Chinese central bank on Tuesday said it is “resolutely opposed” to the US labelling Beijing a currency manipulator.
The People’s Bank of China called the US Treasury Department’s move “wayward unilateralism and protectionist” and said it “seriously undermined international rules”.
The yuan exchange rate “is driven and determined by market forces,” the central bank said in a statement, adding it is “resolutely opposed to this”.
President Trump kicked off the trade war demanding China to reduce massive trade deficit which last year climbed to over USD 539 billion. He is also insisting on China to workout verifiable measures for protection of intellectual property rights (IPR) technology transfer and more access to American goods to Chinese markets.
The 12th round of talks between top trade negotiators from China and US, the first after they broke down in May, lasted just half a day and ended last week in Shanghai with no sign of a breakthrough, but a willingness to continue discussions.
US Congressman Roger Marshall said once again, Trump is doing exactly what he said he would do with China, now in regard to their currency.
“US producers, workers and consumers have waited long enough for an administration who would stand up to China. I’m thankful it’s finally happening,” he said.
On the development, Congressman Bradley Byrne said, “We cannot sit back and allow China to continue to take advantage of our country and put our workers at a disadvantage.”
“I’m proud to stand with President as we finally crack down on China,” he said.
“Great work” by the president to finally hold China accountable for their corrupt actions, Byrne said, adding that a lot of presidents have “talked” about this problem, but Trump finally took action.
On China reportedly stopping from buying US farm produce, Congresswoman Cheri Bustos from Illinois said it’s clear as day that farmers are truly paying the price of Trump’s erratic and short-sighted trade policies.
“Tariffs may sound nice to a Manhattan billionaire – but in rural Illinois, we’re feeling the consequences of a trade war that may hollow out our agricultural economy for generations to come,” she said.