Steven Mnuchin, US Treasury Secretary, listens during a briefing at the White House in Washington/Bloombergby Bloomberg
The US Treasury Department has dropped its designation of China as a ‘currency manipulator’ two days before the signing of a trade deal with Beijing to calm trade tensions.
The Treasury department’s semi-annual report has long offered markets crucial signals about US policy toward countries it deems to be manipulating their currencies.
Steven Mnuchin, the Secretary of the Treasury Department refrained from labelling China a currency manipulator in its first five reports saying there was no justification for such a ruling, despite increasing pressure from the White House.
However, in August 2019 US President Donald Trump overrode that decision after the yuan dropped dramatically in response to US trade tariffs—the first time the US had labelled another country a currency manipulator since 1994.
Mnuchin accused China of deliberately holding down the value of its yuan to create an unfair trade advantage, just hours after President Donald Trump, angered at the lack of progress in trade negotiations, had also accused China of manipulating its currency.
To justify the currency manipulator decision, Mnuchin used a 1988 trade law with a looser definition of manipulation, rather than the more current 2015 law. Under the recent law, China does not meet the three criteria to be designated a currency cheat.
In its latest currency report, the Treasury department said that no major trade partner is manipulating its currency, placing 10 countries including China on its monitoring list.