WASHINGTON – The US Treasury dropped on Monday its designation of China as a “currency manipulator,” a gesture to Beijing just two days before the two countries sign an agreement at the White House to begin resolving their trade war.
“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” said Treasury Secretary Steven Mnuchin in a statement.
His department on Monday released a new macroeconomic report in which the US removes the Asian giant from the currency manipulator category, where the Donald Trump administration had placed last August as the trade dispute worsened.
When a country implements policies to keep its currency artificially low relative to other nations’ currencies, that manipulation results in its goods becoming comparatively cheaper overseas, thus boosting its exports, while other nations’ goods become relatively costlier.
Now, China is being moved onto a “monitoring list” where Washington groups those trade partners it deems deserve “special attention” regarding their monetary practices, specifically how they handle the value of their currencies.
In addition to China, nine other nations appear on that monitoring list: Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Switzerland and Vietnam.
The US Treasury had included China on its currency manipulator list five months ago in what was widely perceived as an escalation of the bilateral trade war.
That decision came just after the People’s Bank of China allowed the Chinese currency, the yuan, to fall precipitously to less than seven yuan to the dollar in what was seen as the breaching of a psychological barrier for investors and something that had not occurred since 2008.
Washington’s decision on Monday comes just days before Trump and Chinese Deputy Prime Minister Liu He, who has headed Beijing’s negotiating team during the trade talks, are scheduled to sign an agreement to launch a process to resolve the two nations’ trade differences.
After almost 18 months of the trade war and an ongoing tit-for-tat hiking of tariffs by the two countries, Trump announced in mid-December that the US and China had finalized the “first phase” of a broad trade pact.
The accord includes the current US 25 percent tariffs on Chinese imports totaling some $250 billion along with reduced tariffs of 7.5 percent for imports valued at approximately $120 billion.
The US-China negotiations have gone through a number of contortions including contradictory reports and veiled criticisms since the announcement of an agreement in principle last October.
The trade tensions between the world’s two top economies, which began last year, have resulted in profound consequences for the global economy.
In its latest reports on global growth published in October the International Monetary Fund lowered its economic growth forecasts for 2019 to 3 percent, two-tenths below the forecast it issued in July, with the numbers burdened by doubts arising from the bilateral trade dispute.