The US has officially named China as a “currency manipulator” – a statement which will intensify tensions between the world’s two largest economies.
The announcement by the US Treasury follows a sharp fall in the value of the Chinese Yuan against the Dollar. The decision rattled investors, with Wall Street’s main stock market indexes recording their worst trading day for 2019. Meanwhile, the decision also fulfils a presidential campaign promise by Mr Trump – who pledged to name China a ‘Currency Manipulator’ – on his first day in office.
Last week, China pledged to retaliate, after US President Donald Trump vowed to impose 10 per cent tariffs on 300 billion dollars worth of Chinese imports.
The US Treasury Department defines ‘Currency Manipulation’ as when countries ‘deliberately influence’ the Exchange Rate between their currency and the US dollar, to gain “unfair competitive advantage in international trade”.
A weaker Yuan makes Chinese exports more competitive – or in other words: cheaper to buy with foreign currencies.
The US says, Treasury Secretary, Steven Mnuchin will now engage with the International Monetary Fund, to eliminate the “unfair competitive advantage” created by China’s latest actions.
The People’s Bank of China said, the slump in the Yuan was driven by “Unilateralism and Trade Protectionism Measures, and the Imposition of Tariff Increases on China”.