China is letting value of yuan slide to offset trade war tariffs, US Treasury Secretary Mnuchin says
- Currency’s slump is not a coincidence and could be the result of Beijing not intervening in markets, politician says
- Chinese firms are absorbing a large part of the tariff rise to prevent price increases being passed on to US consumers, he says
US Treasury Secretary Steven Mnuchin on Saturday accused China of allowing the value of its currency to slide in a bid to offset the impact of Washington’s trade tariffs on the cost of its goods to American consumers.
“It’s not coincidental in my mind that the currency has moved from approximately 6.30 [yuan to the US dollar] to 6.90,” the official said on the sidelines of the G20 finance leaders’ meeting in Japan.
“Traditionally to manipulate a currency, official intervention in the foreign exchange market has to be conducted in a certain way. Intervening to support the currency’s exchange rate is not regarded as currency manipulation,” he said.
“However, when the market is expecting intervention because there have been interventions to support a currency for a very long time – whether by China or any other country – then when there is no intervention that could create a big market impact,” he said. “The decision not to intervene after intervening for a very long period of time may lead the market to view that there is a desire to have the currency to weaken.”
Mnuchin said also that Chinese companies were absorbing a significant part of the tariff rise to prevent price increases being passed on to US consumers. His comments came after US President Donald Trump said on Twitter on Friday night that the US was collecting billions of dollars because of the higher tariffs.
However, both those views have been challenged by economists, including those from the International Monetary Fund, which said in a report published late last month that the “tariff revenue collected has been borne almost entirely by US importers” and that “some of these tariffs have been passed on to US consumers”.
Trump ‘probably planning’ tariffs on all Chinese goods after G20
In its twice-yearly report on foreign exchange policies, the US Treasury said it had “significant” concerns about China’s practices, though once again stopped short of designating the country a currency manipulator.
Mnuchin said that to help reduce the impact of tariffs on US consumers, the government would grant exclusions to companies that were unable to move their production away from China in the short term because of supply chain constraints.
The treasury secretary, who together with US Trade Representative Robert Lighthizer has led the US side in its trade war negotiations with China, said a deal to resolve the dispute was 90 per cent complete but that significant issues remained.
“If China is serious and wants to come back and negotiate a real agreement, then the US is prepared to negotiate to reach a historic deal,” he said. “If not, the US will continue with the plan to proceed with tariffs.”
Mnuchin said he would discuss routine trade issues with People’s Bank of China governor Yi Gang on Sunday, but would leave discussion of the wider trade dispute to Trump and Chinese President Xi Jinping, who are set to meet on the sidelines of the G20 summit in Japan at the end of the month.
That would be the “next important meeting” on the matter, he said.
