Recently, news has come out of the U.S treasury labelling Switzerland and Vietnam as ‘currency manipulators’, a situation that Fyggex has covered lately in an article (click). This was not the first case where Trump has attacked a currency, with the other cases being the EU and Bitcoin. The most famous however, is Donald Trump and China, with attacks starting in 2016, but continuing right until the end of his Presidency.
On 5th December 2016, the first attack on China was launched, with Trump claiming via twitter that they were ‘gaining an unfair advantage over American companies by devaluing its currency and slapping heavy taxes on U.S. products’. Trump said via twitter, “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily taxing our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!” At this point the U.S had imposed tariffs on some Chinese products including steel.
This attack however was baffling to economists. At the time China was battling to keep the Yuan from dropping too far against other currencies. According to CNN, ‘Chinese leaders want to avoid a repeat of the sharp drops that freaked out investors in August 2015 and January 2016. Beijing has burned through hundreds of billions of dollars since last year in efforts to prop up the yuan as huge sums of money have flowed out of the country.’ Therefore, claims by Donald Trump that China was doing the opposite came as a huge surprise.
Donald Trump then proceeded to say “I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens,” which prompted China to hit back at the U.S President. Speaking to the Guardian, a foreign ministry spokesperson Geng Shuang stated that China had “no intention of deliberately devaluing its currency to gain a trade advantage”. He said, “If you must pin the label of ‘grand champion’… on China, then we are a grand champion of economic development. We’ve made great achievements since the start of economic reform and opening-up, making us the undisputed grand champion.”
2018 & 2019
Now in his second full year, President Trump continued to bash China with more claims that it was a currency manipulator. Chinese Premier Li Keqiang expressed the craziness of Trump’s continuous claims in a World Economic Forum in 2018, where he expressed “Persistent depreciation of the RMB will only do more harm than good to our economy”. Adding that it “will only come at a cost of damaging China’s economic environment”- Business Insider.
This didn’t stop President Trump from backing these claims however, claiming yet again in 2019 that China was manipulating the Yuan in a tweet. This tweet, in August 2019 read, “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!”
According to CNBC, China responded to allegations once more, with PBOC Governor Yi Gang saying China will “not engage in competitive devaluation, and not use the exchange rate for competitive purposes and not use the exchange rate as a tool to deal with external disturbances such as trade disputes.”
In January of the new decade, the U.S reversed their claims made in the past, in an attempt to cool tensions and prevent an ongoing trade war. BBC reported that ‘The US said it made the change because China had agreed to refrain from devaluing its currency to make its own goods cheaper for foreign buyers.’
In the middle of the trade war, the Yuan actually started appreciating, which led to the U.S deciding to take back accusations and make a statement saying the “Treasury has determined that China should no longer be designated as a currency manipulator at this time.” As a result, currency tension between the two countries was relieved until the end of Donald Trump’s presidency later in the year.
— Fyggex (@fyggexchange) August 12, 2020
Image: mohamed Hassan
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