In an interview with the Financial Times, US Secretary Treasury Steven Mnuchin defended President Donald Trump’s decision not to label China a currency manipulator.
Mnuchin said Trump’s comments during the campaign “reflected previous periods of time,” and explained the shift by pointing to “the combination of the facts and the combination of what the president said and how China is working with us,” according to the FT.
During his campaign, Trump pledged to label China a currency manipulator on his first day in office. He ultimately did not do that, and the Treasury Department did not label the country as a currency manipulator in their semi-annual report on the currency practices of the major trading partners of the US, which was published on Friday.
There are three criteria that must be met for a country to be labelled a currency manipulator by the Treasury Department:
- The country must have a significant bilateral trade surplus with the US.
- The country has a “material” currency account surplus.
- The country is engaged in persistent one-sided intervention in the foreign exchange market.
In the report, the Treasury included a “Monitoring List” of trade partners that “merit attention based on an analysis of the three criteria.” China, Japan, Korea, Taiwan, Germany, and Switzerland were on the April list, as well as in the last report published in October.
“Treasury will be scrutinizing China’s trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States,” the department wrote in the report. “China will need to demonstrate that its lack of intervention to resist appreciation over the last three years represents a durable policy shift by letting the RMB rise with market forces once appreciation pressures resume.”
“Treasury places significant importance on China adhering to its G-20 commitments to refrain from engaging in competitive devaluation and not to target China’s exchange rate for competitive purposes,” it added. “Treasury also places high importance on greater transparency of China’s exchange rate and reserve management operations and goals.”
The last time the US designated China a currency manipulator was from 1992 to 1994.