President Donald Trump and Chinese President Xi Jinping arrive for a meeting on the sidelines of the G-20 Summit in Hamburg. (Saul Loeb/Pool/AP)
President Trump on Monday accused China and Russia of improperly manipulating their currencies in a way that gives them unfair trade advantages.
“Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!” the president wrote on Twitter.
The accusation, delivered without any evidence or corroboration, directly contradicts a report issued Friday by Trump’s Treasury Department, which did not accuse either country of artificially lowering the value of its currency. Instead, the report found China’s currency had recently moved in a direction that should benefit U.S. exporters.
The Twitter post also could serve as Trump’s first criticism — even if done indirectly — of new Federal Reserve Chairman Jerome H. Powell. The second half of Trump’s post mentions the United States “raising interest rates,” followed by the two-word sentence “Not acceptable!”
It couldn’t be immediately determined if Trump meant Russia and China’s behavior was unacceptable, the Fed’s decision to raise interest rates was unacceptable, or the whole dynamic was unacceptable.
Powell, who has only been Fed chairman for two months, has continued an ongoing process of raising interest rates, something Trump has in the past said he doesn’t like. It is very unusual for any White House official to criticize the actions of a Fed chairman, as the central bank is supposed to be seen as independent and insulated from political interference. Trump nominated Powell for the position, elevating him from his prior post as a Fed governor.
Trump appears to be alleging in the Twitter post that China and Russia are helping keep their currency cheap to help their companies export goods at a time when the U.S. is raising interest rates, a move to check inflation that could raise costs on U.S. companies. But the facts appear to undermine his claim, particularly regarding China’s currency, the yuan.
“The yuan has appreciated against the [U.S.] dollar over the past year,” said David Dollar, a senior fellow at the Brookings Institution and Treasury’s former economic and financial emissary to China. “Accusing China of playing a devaluation game does not make sense.”
Trump is locked in a tense trade battle with China, as he has accused Beijing of closing off markets to American exporters while shipping cheap products into the United States in a way that harms U.S. manufacturers. During his 2016 campaign, Trump defiantly said he would label China a “currency manipulator” on his first day in office.
The U.S. has not formally labeled China a “currency manipulator,” a move that triggers a process of consultation between both countries and could heighten tensions.
Democrats and Republicans have in the past accused Beijing of improperly devaluing its currency in a way that makes their exports more attractive to foreign buyers, but China has recently moved away from this in the face of immense international pressure. That’s one reason Trump has so far declined to label China a currency manipulator through a formal Treasury Department report. He has also said that he didn’t want to do it because he wanted to preserve a good relationship with China on issues such as containing North Korea’s nuclear weapons program.
But Trump’s relationship with China has worsened markedly in the past three months, as he’s taken a more adversarial approach to trade policy. China exports roughly $500 billion in goods to the United States, and the U.S. exports roughly $125 billion in goods to China. The difference between these two figures, $375 billion, is known as a “trade deficit,” something Trump believes should be eliminated or greatly reduced.
What remains unclear is the significance of his Twitter post accusing China and Russia of improper currency practices, particularly if the Treasury Department fails to back those allegations up with facts. Trump didn’t technically accuse either country of being a “currency manipulator” in his Twitter post, though he did say they were devaluing their currencies, which is a form of currency manipulation.
The Treasury Department report, which is issued twice a year and called the “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States,” does list China as one of six countries on a “Monitoring List” that it watches closely. Others on this list include Japan, South Korea, Germany, Switzerland, and India.
Russia isn’t even listed on Treasury’s “Monitoring List.”