The US has labeled China a currency manipulator, in a move that brings already tense relations between the two countries to a boil.
On Monday, the US treasury secretary, Steven Mnuchin, accused China of manipulating its currency “to gain unfair competitive advantage in international trade”. The US will now ask the International Monetary Fund to “eliminate the unfair competitive advantage created by China’s latest actions”.
It is the first such move since 1994 and came as international stock markets fell on fears of an escalation in the simmering conflict between the two trading superpowers. The Dow Jones index lost close to 3% on Monday following similar falls in Asia and Europe.
On Tuesday, Asian markets fell. By the middle of the trading day Australia’s ASX200 had fallen 2%, the Hang Seng was down 0.7%, and the Nikkei 0.7%.
The move to designate China a currency manipulator fulfills Donald Trump’s election campaign promise: “China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the US with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago!” he wrote on Twitter.
The US action came after China allowed its yuan to weaken the key seven-per-dollar level on Monday for the first time in more than a decade.
In early offshore Asian trading on Tuesday the yuan fell as low as 7.1397 per dollar, before clawing back most of the losses after China’s central bank said it was selling yuan-denominated bills in Hong Kong, in a move seen as curtailing short selling of the currency.
China’s central bank said the depreciation in its currency was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China”.
Beijing later said it would stop buying US agricultural products and “will not rule out import tariffs on newly purchased US agricultural products”.
Source: The Guardian