Macroscope | Trump’s ‘currency manipulation criteria’ claim over China dismissed by his own Treasury
Treasury report found ‘no economy satisfied its key three criteria’: a significant bilateral trade surplus with the US, a material current account surplus, and is engaged in persistent one-sided intervention in the foreign exchange market
US President Donald Trump believes the Chinese authorities are “grand champions” in currency manipulation, but the assertion doesn’t stand scrutiny.
If judged by the US Treasury’s current criteria on the subject, US Treasury Secretary Steven Mnuchin and his officials might be hard-pushed to justify branding China a currency manipulator.
Mnuchin himself said last week the US Treasury will follow procedure. “We have a process within the Treasury where we go through and look at currency manipulation across the board,” he said.
“We’ll go through that process. We’ll do that as we have in the past. We’re not making any judgements until we continue that process.”
The process alluded to by Mnuchin is described in the US Treasury’s semi-annual Report to Congress on the “Foreign Exchange Policies of Major Trading Partners of the United States” and is derived, as described in last October’s report, from “the intensified evaluation provisions of the Trade Facilitation and Trade Enforcement Act of 2015.”
In October 2016, the US Treasury Report found that no economy satisfied all three criteria
The process prescribed by the 2015 Act requires the US Treasury to undertake an enhanced analysis of exchange and externally‐oriented policies for each major trading partner that has: (1) a significant bilateral trade surplus with the United States, (2) a material current account surplus, and (3) engaged in persistent one‐sided intervention in the foreign exchange market.