As part of his wide-ranging Bloomberg interview which covered everything from cutting capital gains tax, Fed Chair jerome Powell, AG Jeff Sessions, Trump’s desire to withdraw from the WTO, Trump’s rejections of the EU offer to cut auto tariffs, the trade deal with China, social networks and much more, Trump also said that his administration is currently examining how to determine whether countries are manipulating their currencies, while once again accusing China of trying to devalue its currency, and studying whether to finally label China a currency manipulator.
“It is a formula,” Trump told Bloomberg News in the Oval Office. “And we are looking very strongly at the formula.”
Trump most recently accused China of manipulating its currency lower during a Reuters interview last week, although that accusation conflicts with the findings of his own administration: in the semi-annual report on foreign-exchange policy, the Treasury Department stopped short of naming China, the EU or any other country as a currency manipulator.
However, Trump disagreed and said that China has devalued its currency in response to a recent slowdown in its economic growth.
“They’re trying to make up for lack of business by cutting their currency,” he said. “It’s no good. They can’t do that. That’s not, like, playing on a level playing field.”
While many strategists agree that the recent Yuan devaluation has indeed offset much of the negative impact from US tariffs, where there is disagreement is whether this is due to market forces, or as a result of PBOC policy. To be sure, in recent weeks the Chinese central bank has been aggressively pursuing policies to stabilize the Yuan in the short term – Beijing burned through $1 trillion in reserves in 2015/2016 in trying to defend the Yuan following the surprising August 2015 devaluation which caught everyone by surprise – which however to some are a little too obvious, meanwhile the Yuan has tumbled, recently suffering its fastest monthly drop on record.
Under guidelines established in 2016, the finding is based on whether countries meet three criteria for the designation: a minimum $20 billion trade surplus with the United States, a current account surplus in excess of 3% of GDP, and repeated interventions in currency markets.
The U.S. hasn’t officially accused another country of currency manipulation since 1994, but listening to Trump that may soon change.
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Author: Tyler Durden