U.S. Treasury Secretary Steven Mnuchin on Monday night declared China to be a currency manipulator, just hours after the Chinese government allowed the yuan to slip below a 7-to-1 dollar ratio for the first time in over a decade.
Why it matters: This is a further ratcheting up of trade tensions between the two countries, and also marks the first time any U.S. president has used the currency manipulator label since 1994.
How it works: Under a 2015 law, in order to be a currency manipulator, a country needs to spend 2% of GDP on currency manipulation over a 12-month period. China is not doing this.
The Wall Street Journal reports:
The decision, which came hours after President Donald Trump accused China of unfairly devaluing its currency, marks a reversal for Treasury: In May, it had declined to sanction China for manipulating its currency.
The U.S. has not put China on the currency blacklist since 1994. The designation could pave the way for more U.S. sanctions against China.
Earlier Monday, China had allowed its currency to weaken to an 11-year low, a move that gives its exporters a price edge in world markets and eases some of the damage from U.S. tariffs on Chinese products.
Yowza. This is escalating fast. It seems almost besides the point to say that in this cast the US is actually on the wrong side. China *was* a currency manipulator back in 2010-11. But at this point if anything it’s keeping the renminbi artificially high https://t.co/AiL7ewEXUz
— Paul Krugman (@paulkrugman) August 5, 2019