Published: Wed, April 26, 2017
Business | By Pat Ferguson

Trade adviser turns on Trump over his China currency U-turn

Trump, who on the campaign trail blamed China for "stealing" and prosperity by cheapening its currency, repeatedly promised to label the country as a currency manipulator on "day one" of a Trump administration - a move that would require special negotiations and could lead to punitive duties and other action.

The countries - China, Japan, Germany, South Korea, Taiwan and Switzerland - were the same six named in the last currency report issued by the Obama administration in October.

The three criteria include a significant bilateral trade surplus with the USA of at least USD20 billion and a material current account surplus which is at least 3% of GDP.

"An essential component of this administration's strategy is to ensure that American workers and companies face a level playing field when competing internationally", Treasury Secretary Steven Mnuchin said in a statement.

"No major trading partner of the United States met the standards identified in Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 for currency manipulation in the second half of 2016", the Treasury Department said in a report to Congress.

In the interview with The Wall Street Journal, Trump said he had offered the Chinese better trade terms in exchange for their help on addressing the nuclear threat from North Korea.

Treasury said it will be scrutinising 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.

Both the White House and China's state media have touted the personal bond forged during the roughly 18 hours the two leaders spent together last week, including when Trump's five-year-old granddaughter demonstrated her Chinese language skills for Xi.

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The reversal on branding China a currency manipulator is among several changes in which Trump has softened tough stances he had taken during the campaign.

Economists and business leaders had said that China wasn't manipulating its currency.

China, which has since 2011 joined Russian Federation to veto six UN Security Council resolutions on Syria, abstained from a vote Wednesday on a US -led proposal criticizing last week's chemical weapons attack.

Beijing has not intervened in markets to weaken the value of its currency - the third criteria - and in fact has tried to keep the renminbi from falling further amid the country's relatively sluggish growth rate.

"China has clearly embarked on market-oriented exchange rate reform, with the yuan's daily trading band already expanded to 3 per cent from 0.3 per cent", Zhou said. The latest report's censure of China and other countries-including South Korea and Germany-could be used in the future as a pretext for new tariffs.

Separately, the U.S. president has also commissioned a review of all the US's trade deals and barriers faced by its exporters with a view to finding out why the country has such an enormous trade deficit (2.7pc of GDP in 2016, which is large by trade deficit standards).

It also called on Taiwan to be more transparent in its purchases of currency on global markets.

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