The Trump administration on Monday (local time) revoked its designation of China as a currency manipulator ahead of the signing of a “phase one” trade deal between the world’s two largest economies.
The Treasury Department reversed an August decision to label China a currency manipulator in its semiannual foreign exchange policy report released Monday afternoon. The decision, which was reported in advance by multiple media outlets the same day, comes two days before Trump is set to sign a preliminary trade agreement with China, The Hill reported.
“The Treasury Department has helped secure a significant Phase One agreement with China that will lead to greater economic growth and opportunity for American workers and businesses,” said US Treasury Secretary Steven Mnuchin.
“China has made enforceable commitments to refrain from competitive devaluation while promoting transparency and accountability,” he added.
From the start of his 2016 campaign, President Donald Trump has accused China of devaluing its currency to make its exports comparatively cheaper than the US goods in foreign markets. While the former had promised during his campaign to formally label China a currency manipulator, the Treasury Department did not do so until trade tensions spiked last summer.
The Department designated China on August 5 after Beijing allowed its currency, the yuan, to fall below an exchange rate of 7 to 1 US dollar. The administration further argued that the country had taken steps to devalue its currency in order to gain an unfair advantage in international trade.
Treasury’s labeling of China as a currency manipulator had caused shockwaves through financial markets, sending stocks tumbling over fears of a currency war. But tensions eased after the Asian country allowed the yuan to rise above the seven-to-one exchange rate, laying the groundwork for an October tariff cease-fire.
Currency issues will remain a key focus in trade negotiations even if Treasury reverses China’s formal condemnation. Trump and trade protectionists in both parties insist that China takes other discreet action to push down the value of the yuan while the U.S. dollar remains strong.
“China is a currency manipulator–that is a fact. Unfortunately, President Trump would rather cave to President Xi than stay tough on China,” said Senate Minority Leader Charles Schumer in a statement today.
“When it comes to the president’s stance on China, Americans are getting a lot of show and very little results,” Schumer added.