Trade war: China will not help US with currency devaluation to reduce deficit
Common sense lacking in Washington, says Beijing’s ambassador as tensions escalate
Beijing will not help Washington turn around its trade deficit by agreeing to measures aimed at devaluing the US dollar, according to China’s top envoy to the United States.
Cui Tiankai, Chinese ambassador to the United States, also blamed advisers in Washington for lacking “common sense” amid the escalating trade war.
Cui was speaking on Friday to the US-based think tank Centre for Strategic and International Studies as the world’s two largest economies continue to escalate their tit-for-tat tariff war.
He ruled out a Plaza Accord approach to resolving the US trade deficit, referring to a controversial international agreement which was used in the 1980s to improve the US trade position by devaluing the dollar.
US President Donald Trump has applied tariffs on a total of US$50 billion worth of Chinese imports since July, and is preparing to impose duties on another US$200 billion of Chinese goods next month.
Trump has accused China of using unfair trade practices and industrial policies, leading to a US$375 billion trade deficit with China in 2017.
Beijing has so far retaliated by levying duties on US$50 billion of US goods, and threatened tariffs on an additional US$60 billion of American imports.
“Honestly speaking, we are facing a big problem. Some people who are in high places or are advising the government and leaders on economic and strategic issues don’t have sufficient common sense,” Cui said, without naming the US.
“I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation,” he said at the meeting in Washington attended by both US and China experts.
The Plaza Accord was imposed by the United States on its allies in the 1980s as a solution to its slowing economy and trade deficit with Japan.
Japan, France, West Germany and Britain agreed to the accord in September 1985 and jointly intervened in foreign exchange markets to depreciate the US dollar against the yen as well as the Deutschmark, in an attempt to lower the dollar and make US exports more competitive.
Yet the accord was controversial, with some economists seeing it as a fundamental reason for the sharp appreciation of the Japanese yen and consequent decade-long recession of the 1990s.
Cui’s reference to the Plaza Accord came a week after another round of trade negotiations between a Chinese delegation and US government officials – believed to be centred on the weakening Chinese currency – ended fruitlessly in Washington.
Ahead of the trade talks, Trump again accused China of manipulating its currency, pushing the yuan lower to help offset the effects of US trade tariffs.
China’s central bank sets a daily exchange rate for the yuan and the country’s currency policies were a frequent target for Trump throughout his presidential campaign.
He has remained subdued on the issue during his presidency, until now.