Donald Trump could be ‘laying groundwork for more tariffs’ by labelling China a currency manipulator

There is no direct US legal provision linking currency manipulation with tariff imposition, but it does free the US president up to take more unilateral action

Other courses of action include a ban on US government procurement from China, an end to trade talks and an investigation by the International Monetary Fund

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The Chinese yuan depreciated below 7 to the US dollar on Monday for the first time since 2008. Photo: AP

Published: 8:30pm, 6 Aug 2019Updated: 11:37pm, 6 Aug 2019

The decision by the United States government to label China as a “currency manipulator” offers the White House greater scope to act unilaterally against Beijing, which could lead to a further escalation of trade war tariffs, analysts said.

The US Treasury made the announcement – which sent global markets into a tailspin – after the Chinese yuan depreciated below 7 to the US dollar on Monday for the first time since 2008, saying that the devaluation gave China an “unfair competitive advantage in international trade”.

Within US law, there is no direct provision linking currency manipulation with the imposition of tariffs. However, under Section 701 (c) of the Trade and Facilitation Enforcement Act of 2015, US President Donald Trump may bypass traditional courses of action, where it is judged that currency manipulation has “an adverse impact on the United States economy greater than the benefits of taking remedial action”, or where it “would cause serious harm to the national security of the United States”.

More conventional courses of action, according to the law, include a ban on US government purchases from China, a request for “rigorous surveillance” of China’s exchange rate and macroeconomic policies by the International Monetary Fund, as well as a reassessment of whether the US should even be involved in trade negotiations with Beijing.

“The currency manipulator designation does not specifically provide for the application of punitive tariffs, but it does not preclude them, either,” said Stephen Olson, a former trade negotiator with the Office of the United States Trade Representative and a research fellow at the Hinrich Foundation.