Trump's China rant had 1 truth and 2 lies

On Sunday night Donald Trump went on a mini-rant about China and its relationship with the United States.

In it, he made three statements. One of them was true. Two of them were not.

I’m calling them lies, but I’ll admit that it’s never never clear if Trump knows whether he’s not telling the truth or just doesn’t have his facts straight. So you can call them whatever you want. 

Here’s what he said:

“Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!” Trump said on Twitter.

So he’s railing on China for purposely depressing the value of its currency, the yuan — which has fallen a whopping 5% in the last six months — and putting heavy taxes on US goods going into the country while the US does not tax Chinese goods coming into our country.

Pretty much all of that is untrue.

The bit about the South China Sea buildup, though, is very real. And it’s a reason the Obama administration started its “pivot to Asia” policy — to build a bigger US presence in the region. It’s also part of the reason officials argued for the all-but-now-dead Trans Pacific Partnership trade deal.

They saw it as a way of cementing US soft power with China’s neighbours.

Falling yuan

Lets break down Trump’s un-truths first. China hasn’t been purposely devaluing their currency, the market has been doing it for them. The Chinese economy has been slowing down at a very steady clip since 2014.

That is because the government is trying to guide the economy through a difficult transition from one based on manufacturing and exports, to one based on the service sector and domestic consumption. To do that, though, a country needs a strong currency. 

So right now, it’s not in China’s best interest to watch its currency fall. When it does, people take their money out of the country too, making the situation worse. The government has been spending capital trying to guide the yuan down slowly. And it’s responded to outflows by tightening capital controls, which has allowed it to avoid selling down foreign exchange reserves at the rate of $100 billion a month, according to Societe Generale’s analysis.

Again, not an ideal situation, especially for a country that is struggling with trillions in debt in its banking in corporate sectors.

China capital outlfows chartsSociete GeneraleThese outflows are a scary situation for China — one a stronger yuan would help to mitigate.

Trump’s assertion that the US doesn’t slap tariffs on Chinese goods is also incorrect. According to CBS News, Chinese products are subject to tariffs of 2.5% to 2.9% coming into our country — but that’s not even the whole story. The US has retaliated against China on a number of fronts in terms of trade. I’ll give you one example.

For years the US steel industry has been concerned over Chinese steel flooding the market, depressing prices around the world.  The US, in turn, slapped tariffs of 500% on Chinese steel. It’s also filed 11 suits against China with the World Trade Organisation since Obama took office.

The results of this policy have been mixed. Manufacturers who buy US steel now worry that prices are getting too high too fast.

And then there’s the truth

It is absolutely true that China has been building out islands in the South China Sea and placing military structures on them. 

From Business Insider Senior Correspondent, Amanda Macias:

In August, the Asia Maritime Transparency Initiative (AMTI), a unit of the Center for Strategic and International Studies, published satellite imagery of several unidentified hexagonal structures on Fiery Cross, Subi, and Mischief reefs.

“I’m afraid we still don’t know for sure what the structures are, beyond saying that they appear defensive in nature,” Gregory Poling, director of AMTI, told Business Insider about the hexagonal designs.

China has claimed veritable dominion over the waters in the South China Sea, one of the world’s busiest waterways for trade. A few months ago the Permanent Court of Arbitration invalidated Beijing’s vast territorial claims over the water after The Philippines filed a suit against the country.

So one out of three — not exactly the best score for the future President of the United States. And again, it’s unclear whether or not Trump knows that the Chinese economy has changed recently, or if he’s trying to distract from his breach of protocol.

On Friday Trump took a 10-minute telephone call with Taiwan President Tsai Ing-wen  — a violation of a decades long silence between the US and Taiwan. 

China considers Taiwan a part of its country under what is known as the “One China Policy.” As such, Chinese diplomats have filed a formal complaint over Trumps phone call.

For more on Trump, China and trade wars, listen to Business Insider’s Linette Lopez and Josh Barro on their podcast, Hard Pass:


The opinions expressed in this article are those of the author.

NOW WATCH: 7 inventors who were killed by their own inventions

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.