US President Donald Trump accused China and Russia of devaluing their currencies in a fiery tweet on Monday, breaking from his own Treasury chief’s view that no major trading partners are currency manipulators.
“Russia and China are playing the Currency Devaluation game as the US keeps raising interest rates. Not acceptable!,” Trump wrote.
His comments on China contradicted a Treasury Department semi-annual report on Friday that refrained from labelling any country a currency manipulator based on specific criteria. Russia is not among the 12 largest trading partners that are evaluated in the report.
Trump didn’t provide any evidence to substantiate his claim.
The attack added fuel to the brewing trade dispute between the US and China and drew swift criticism from Russia, which the White House recently sanctioned and clashed with over Syria. The Bloomberg Dollar Index slipped to its lowest level since March 26 following Trump’s tweet, while Treasuries fluctuated.
Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!
— Donald J. Trump (@realDonaldTrump) April 16, 2018
“The basis for this accusation is incomprehensible, and it only elicits a smile, because both business and the government are interested in a stable national currency,” Anatoly Aksakov, the chairman of the financial markets committee of Russia’s lower house of parliament, said in response to Trump’s tweet, according to state news service RIA Novosti.
A Treasury spokeswoman referred questions to the White House, which offered little clarification on the apparent contradiction.
Treasury has China on its watch list, and the administration is “constantly monitoring” the issue, White House Press Secretary Sarah Huckabee Sanders said to reporters aboard Air Force One. US Treasury Secretary Steven Mnuchin is among the cabinet secretaries who traveled with the president to a tax-policy event in Florida on Friday.
Trump’s comments on Monday are “another implicit signal of the administration’s desire for a weaker US dollar – especially against major trading partners,” said Viraj Patel, a London-based currency strategist at ING Groep NV.
“These weak dollar expectations will remain entrenched in currency markets, especially if the administration continues its mercantilist policy focus.”
Earlier this year, seemingly off-the-cuff remarks from Mnuchin that a weaker dollar in the short term benefited the economy roiled currency markets. They were a reiteration of comments he made to the Senate as it prepared to vote on his confirmation more than a year ago.
In January, following Mnuchin’s comments about a weak dollar, Trump said: “I don’t like talking” about the dollar. “Because frankly, nobody should be talking about it.”
Trump has repeatedly blasted Beijing for failing to reduce its trade surplus and open its markets to American investment. China’s yuan, however, has gained about 10 per cent against the dollar over the past 12 months, climbing in March to the strongest level since August 2015.
The rouble has weakened more than 9 per cent against the dollar in the past year, with much of the decline following the US’s introduction of sanctions on dozens of Russian tycoons, companies and key allies of President Vladimir Putin. The US said on Monday it will decide in the near future whether to impose additional sanctions against Russia.
Trump’s suggestion that a currency war is on the horizon comes as central bankers and finance ministers from around the world prepare to gather in Washington for the spring meetings of the International Monetary Fund this week.
The Treasury’s foreign currency report last week ratcheted up criticism of China’s failure to correct its trade imbalance with America and said that the increasingly “non-market direction” of China’s economy presented a risk to global growth.
The Trump administration is increasingly turning to currency policy to combat any trade imbalances. The Treasury last week said it is considering adding the number of economies it tracks in its currency policy review.
China is evaluating the impact of a gradual yuan depreciation as the country’s leaders weigh their options in the trade spat with the US, according to people familiar with the matter.
A weaker yuan makes imports from China to the US cheaper, driving up America’s trade deficit. The president has repeatedly complained about the US trade shortfall with China, which reached US$337 billion in goods and services last year.