Trump adds a dismal dimension to the US-China trade dispute | Jeffrey Frankel

President asserts that the recent depreciation of the yuan amounts to currency manipulation. Not true

The trade war between the US and China is heating up again, with the US president, Donald Trump, abruptly announcing plans to impose a 10% tariff on the $300bn (£248bn) worth of imports from China that he had so far left untouched. The Chinese authorities then allowed their currency, the yuan, to fall below the symbolic threshold of seven to the dollar. The Trump administration promptly responded by naming China a “currency manipulator” – the first time the US had done that to any country in 25 years. Pundits declared a currency war and investors immediately sent global stock markets lower.

The US assertion that the recent depreciation of the yuan amounts to currency manipulation is not true. It would be more correct to say that the Chinese authorities gave in to market pressure – the immediate source of which was none other than Trump’s announcement of the new tariffs.

Related: Global trade disruption is a symptom of a deeper malaise | Mohamed El-Erian

Related: Could devaluation of China’s yuan trigger the next financial crisis? | Larry Elliott

Continue reading…