Free Trade

Trump Administration Labels China a 'Currency Manipulator' After China Briefly Stops Manipulating Its Currency

Don't worry about China's currency manipulation. It only hurts China's own people, and benefits American consumers and businesses.


If you want a quick glimpse into the up-is-down, right-is-left world of the United States-China trade war, look no further than something Bloomberg's Saleha Mohsin wrote Monday.

Referring to comments that Treasury Secretary Steve Mnuchin made in June, Mohsin wrote that the Trump administration believed "China was intervening in currency markets to prop up the yuan, and warned it could be designated a manipulator if it stopped."

Read that again. China "could be designated a manipulator if it stopped" artificially propping up its currency.

Indeed, that's exactly what happened on Monday. In response to a renewed threat from Trump to hit Chinese-made goods with tariffs, the Chinese government hit back in part by doing…nothing. China simply allowed the yuan to fall—as it would have, naturally, on the back of the news that the trade war between the U.S. and China was ramping up.

In return, Mnuchin issued a statement accusing China of having taken "concrete steps to devalue its currency"—even though the real culprit for the yuan's slide is a lack of artificial support, not a deliberate devaluation—and the United States officially declared China to be a "currency manipulator."

It's not that the label isn't accurate. China has been manipulating value of the yuan for years—decades, really—as a way to make exports from China more attractive to foreign buyers, and to avoid slipping into recession during economic downturns. Most of those interventions took place between 2003 and 2014, and China has largely stopped trying to influence the value of the yuan in recent years. Letting the yuan fall on Monday wasn't an act of currency manipulation. It was the exact opposite, although China did take action on Tuesday to limit the yuan's slide.*

"As global uncertainty stokes demand for dollars, the certainty of U.S. tariffs on Chinese-originating goods further reduces demand for Chinese yuan, exacerbating the downward pressure on the price of yuan in dollars," explains Dan Ikenson, director of trade policy studies at the Cato Institute. "The People's Bank of China observing the value of the yuan plummet as markets respond to Trump's tariff frenzy is not currency manipulation."

Writing at Forbes, Ikenson pointed out that the Chinese government has burned through more than $1 trillion trying to keep the yuan from falling as the trade war has taken its toll. Sooner or later, letting the currency fall was almost inevitable.

So this looks like a win for the Trump administration, right? Finally, the trade war is exacting enough of a toll on China that the Chinese government will have to stop propping up its currency—something that Trump believes gives China an unfair advantage.

Except, well, that's almost completely wrong. Propping up its own currency actually does very little to help China. Who benefits from China's artificially high yuan? Americans.

"To the extent that currency manipulation is real and works as advertised, it makes the exports of countries that practice it artificially inexpensive for foreigners to buy," Don Boudreaux, an economics professor at George Mason University wrote in February 2017, when Trump first raised the prospect of whacking China over its supposed manipulation of the Yuan. "Currency manipulation transfers wealth from the citizens of countries that practice it to the citizens of countries fortunate enough to buy the manipulators' subsidized exports."

In other words, the United States took actions against China with the intention of causing the yuan to lose value—despite the fact that an artificially high yuan is beneficial to U.S. consumers and businesses—and then labeled China a currency manipulator when it stopped manipulating its currency so the yuan could fall in value in response to economic actions designed to create that outcome.

Confused yet?

The bottom line is that the act of calling China a currency manipulator doesn't mean a whole lot in practical terms. But it does pave the way for the Trump administration to open another front in the trade war and, probably more importantly, it continues to erode the trust between the governments of the world's two largest economies. That's why markets reacted poorly yesterday, and why some analysts say the prospect of a global recession is rising. That, and the fact that the ongoing trade and currency war with China is being conducted by a president who doesn't seem to know whether it's better to have a weak dollar or a strong one.

So it's probably no wonder things seem a bit topsy-turvy right now.

"With the Trump administration threatening to stop Beijing's alleged currency manipulation, and Beijing resisting," Boudreaux wrote back in 2017, "it's as if the Trump administration believes itself to be charged with the responsibility of protecting the welfare of the Chinese people at the expense of American citizens, while the government in Beijing plays the role of benefactor of the American people at the expense of Chinese citizens."

Mercantilism makes for strange bedfellows.

*This post has been updated to clarify China's currency manipulation practices.

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  1. Huh. So the Chinese government subsidized its own exports, in the form of a manipulated currency, in order to sell me cheap stuff? China’s government is taxing their own citizens so that I can have low prices?

    Sounds like a deal to me!

    1. “Sounds like a good deal to me”

      That’s why every country does it and all the time.

      1. You ADMIT Trump’s latest fuckup!

        1. Poor Hihn

          1. You ADMITTED Trump’s latest fuckup!
            Poor YOU. (lol)

            1. 2 at once? You must be on super meds!

              1. They travel in a pac, like wild dogs. (lol).

        2. Fuck off hihn

          1. MAKE ME, PUNK.

      2. Hihn has dug into his sock drawer once again. For no discernible reason.

    2. How is Zimbabwe not the richest country on Earth? (or Venezuela)

      1. Because no one wants to buy stuff from Venezuela or Zimbabwe?

        1. They don’t manufacture enough to export.
          Economics 101, chapter one, page one.

    3. Super individualist comment. Why do you hate Chinese people but love Mexicans? If I didn’t know better, I’d say you’re a bigot who likes to virtue signal.

      1. I don’t hate Chinese people. I am not going to complain too much if China’s government acts stupidly in ways that benefit me.

      2. You do know better.
        Jeff is a psychotic bigot who likes to virtue signal

    4. “it only hurts China’s own people, and benefits American consumers and businesses.”

      This is pretty stupid and fairly demonstrates the lack of understanding libertarians are known for. (well, simple ones anyway)

      If you are concentrated on trade and economics as trade and economics then of course this is a reasonable conclusion. It is a libertarian view that assumes free markets and no other considerations other than the actions of free individuals. It is also massively stupid for that very reason. It assumes that others are operating using the same values and objectives you are.

      China (or it’s government) on the other hand, wishes to become a (or the) dominate world power. To do this the are not focused on making a profit in the short term, or maximizing benefit to the people of China. They are focused on controlling primary resources, basic manufacturing, and acquiring (by development or theft) technology. They realize that although they are able to make the Chinese people sacrifice to obtain control of these things, eventually when control of these things are acheived, they wield considerable leverage over other nations … in particular the US.

      When all or electronics (already most of them including military) come from China, how will we maintain our economy when they cut them off? When they add back doors to our computer boards (and they HAVE done this and been caught once) how will we operate a modern economy when they shut it all down remotely?

      The key to seeing China’s actions realistically is to understand they are pursuing economics as an extension of political and military strategy. They are pursuing power, not wealth.

      Until you start discussing trade with China from this perspective, you are going to continue to say stupid things like “they are only hurting themselves” when in fact they are accepting pain today (easier to impose in a oligarchy) in pursuit of dominance later.

      1. Yes….this ^ X1000.

        Faced with a serially lying, serially cheating and serially stealing trade partner, what would the ideological purists have us do? Just lay back and try to enjoy the rape?

        This is POTUS Trump getting himself one more tool in the tool shed to fight the trade war.

  2. You wanna know how close FBI agents are to CNN reporters? This is how close.

    High-ranking FBI insiders say they reported top-level FBI brass for continued sexual romps with CNN reporters but former FBI director James Comey and his successor Christopher Wray looked the other way.

    And did nothing.

    The extramarital affair between fired FBI boss Peter Strzok and FBI top lawyer Lisa Page is public knowledge. Page has resigned from the Bureau.

    Now Strzok’s name has surfaced again in regards to the unfolding CNN scandal, according to FBI insiders. And other top FBI bosses are implicated as well for sexual trysts with CNN reporters and anchors.

    Here is what we know. High-level FBI officials complained to the highest executive offices of the FBI that Strzok and more top agents were engaged in sexual relationships with CNN’s on-air personnel. Those high-ranking sources say top management did not investigate the reports and the relationships continued. And the sexual romps still might continue today.

    1. How is this our business as long as both cnn and fbi avoid conflicts of interest? Has that been alleged?

      1. The conflict of interest is implied.

        According to the article, the FBI’s policy on extramarital affairs:

        The FBI for decades did not permit married agents to engage in extramarital affairs with anyone, especially members of the media. That offense was grounds for termination because FBI directors like Louis Freeh believed agents could be compromised by blackmail and outside influence and therefore the practice was outlawed.

        I’m not sure any of this is actionable— aside from internal FBI policy, but I’m definitely interested to know if my publicly employed law enforcement officials are having affairs with a major news agency reporting on FBI leaks and sources.

        1. I’m not sure any of this is actionable

          Considering your source, I’m not sure there’s a lick of truth to it.
          Not to deny that Obama is a Muslim from Kenya, that Trump had a “record victory margin in the Electoral College” (39,000 voters!), and that Trump has added more new auto manufacturing jobs than Obama did (smirk) … while ALREADY adding more 8-year debt than Obama did AFTER 8 years!

        2. The conflict of interest is implied

          By you, based on a right-wing wacko web site.

          The “ban” on extra-marital affairs is even wackier!! Pay attention.,
          In ANY employment situation, how many such affairs are open knowledge THINK.

    2. Do you have anything NOT from a psycho right-wing website?
      Might that by why Strzok has sued the FBI, for your fevered lunacy.

    3. Paul….This is an especially ugly accusation. Name the CNN reporters and anchors who conducted extramarital affairs with FBI agents. Otherwise, it is an ugly smear without evidence. That is what Progs do.

      It may be true, but there is no evidence….yet.

  3. Having a country artificially lower the price of its exports, giving them an advantage in the market, by non-market forces doesn’t sound like a good deal.

    1. When the yuan is kept artificially low (as it was for a long time) their products gain market share at the expense of the workers who are kept poor. Now that China dominates some markets (see rare earth metals) they can manipulate the yuan to screw the rest of the world, I.e. us. Trump is right, we have been played for years. That’s what totalitarian governments can do.

      Tariffs may not be the best way to fight back, but we should be fighting them economically.

      1. “we”?
        Why is there some collective moral duty to “fight” China?
        It should be left up to each individual’s morality to decide how to spend their dollars. I would prefer it greatly if the state did not try to substitute its moral judgment for that of every citizen.

        1. So you’re saying there should be no collective moral duty to house, feed, medicate, and educate non citizens either then?

          1. No collective moral duty to house, feed, medicate, and educate anyone. That’s right.

            1. Dizzle is a doofus who swallows the Trumpian bullshit about what illegals get … and he’s even dumb enough to confuse illegals with non-citizens!!!! . They’re all mindless robots.

            2. +1

        2. See my comment above.

          Not that you will understand it, but I never give up hope for you Jeff.

      2. When the yuan is kept artificially low (as it was for a long time) their products gain market share at the expense of the workers who are kept poor

        Only if one is totally ignorant of how foreign exchange works, Japan did it from the very late 70s,and much of the 80s, and had our auto industry on its knees..

        In 1980, BOTH parties campaigned on “Reindustrialization.”
        Trump’s gonna get his ass reamed … again .. in foreign policy. How much permanent damage to our economy from his puny ego?

  4. I noticed the Lefty Narrative changed today after they got their ducks in a row following the surprise Chinese government decision to devalue their currency.

    At least Boehm will admit that the Chinese Communist do manipulate their currency.

    1. At least Boehm will admit that the Chinese Communist do manipulate their currency.

      And that Trump has fucked up and lost BIGLY.

      Do the math, Sparky. Second time I’ll explain this for you.
      See how the manipulation makes Chinese goods CHEAPER to Americans … huh? ,… does that mean China just jammed it up Trump’s ass!! …. YES … They just PROVED that Trump’s tariffs would be USELESS … on top of screwing US consumers and farmers.

      Again, the ONLY way Trump’s dumbfuck trade war can win is …
      1) Higher prices on Chinese goods reduces their imports here.
      2) AND consumers switch to AMERICAN goods .. instead of (also cheaper) imports from … everywhere else on earth.

      And you seem PROUD that China’s manipulation is a WINNING shot across Trump’s bow … extending his UNBROKEN string of foreign policy FAILURES.

    2. I noticed the Lefty Narrative changed today

      How? Since you’re righty narrative has exploded in your puss. (already documented)

  5. Don’t worry about China’s currency manipulation. It only hurts China’s own people

    And they can eat shit and die. ????

    1. Well, I tried with the emoji. ????‍♂️

      1. Kinda funny how many think China’s people are hurt.
        They always go full wacko when Trump gets a

        1. Kinda funny how many think China’s people are hurt.
          They always go full wacko when Trump gets another fuckup.
          Or are they just ignorant of how foreign exchange works?

          China just jammed Trump’s threat up his ass.
          And twisted.

      2. You can’t hurt others economy like this, it takes time and patience.

  6. Why do many attack “the idiocy of Trump’s protectionism” but keep total silence on the even larger idiocy of access to credit protectionism?

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