President Donald Trump said he won’t brand China a currency manipulator, retreating from core campaign promise, though he argued that a strong dollar is hampering the ability of American firms to compete.
Trump, in an interview with the Wall Street Journal on Wednesday, appeared to acknowledged that China hasn’t been intervening to weaken its currency recently. “They’re not currency manipulators," he said.
It’s a shift of opinion after Trump accused China during last year’s election campaign of manipulating its currency to gain the upper hand in trade and vowed to label the country a manipulator on his first day.
U.S. 10-year bond yields slumped and the dollar fell after Trump indicated in the interview that the U.S. currency is getting so strong that it’s harmful to the economy, while other nations “are devaluing” their currencies.
“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting -- that will hurt ultimately,” he told the newspaper. “It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”
His blunt remarks about the greenback mark a departure from the recent practice of presidents, who have generally steered clear of commenting on the value of the currency for fear of jolting markets. It’s usually left to the Treasury secretary to comment on the government’s behalf on currency matters, and the standard line is that a strong dollar is good for America.
Treasury Secretary Steven Mnuchin has said that long-term strengthening of the dollar is in the best interest of the economy, while in the short-term it could create issues.
In the interview, the president left open the possibility of reappointing Janet Yellen as Fed chair, adding that he likes “a low interest-rate policy.”
Commerce Secretary Wilbur Ross has suggested that “currency misalignments” can be addressed in a report his department is preparing on trade abuses by countries that run large trade surpluses with the U.S. Misalignment could mean a country isn’t deliberating manipulating its currency, according to Ross.
The Treasury is expected this month to release its first report on foreign-currency practices under Trump, which is the formal channel to impose a manipulator designation that would lead to negotiations and penalties. The department is required by law to report to Congress twice a year on whether America’s major trading partners are gaming their currencies.
Treasury’s last currency report, in October, included China and five other nations on a watch list of countries at risk of engaging in unfair foreign-exchange practices, but it didn’t name any country a manipulator -- a step the U.S. hasn’t taken since 1994.
Sparing China from the currency-manipulator label is the latest indication that Trump’s rhetoric on trade as the Republican candidate last year was harsher than the policies he’s establishing as president. The administration has yet to launch renegotiation of the North American Free Trade Agreement, another step Trump promised during the campaign. Nor has the U.S. imposed punitive tariffs on foreign countries or U.S. companies that move jobs offshore, as Trump has threatened.
International Monetary Fund Chief Managing Director Christine Lagarde earlier Wednesday warned the U.S. against targeting the exchange-rate policies of any single nation, saying that currency assessments must be done on a cohesive, global basis.
“You cannot just identify one particular country, because the whole system works together,” she said in an interview with Bloomberg TV. “When a currency goes up somewhere, it goes down somewhere else.”
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