REUTERS/Kevin Lamarque
- On early Monday, China allowed its currency — the yuan — to weaken past the psychologically important point of 7 to the dollar for the first time in more than a decade.
- President Donald Trump said that marked a "major violation" and accused China of unfairly wielding its currency to retaliate against the US.
- The weakening yuan will likely cast another layer of uncertainty on US-China trade talks, which aren’t set to resume in person until after a scheduled escalation September 1.
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President Donald Trump lashed out on China for a "major violation" on Monday after the nation allowed its currency to weaken beyond a key threshold against the dollar, marking the latest point of contention in an escalating trade dispute between the largest economies.
The Chinese yuan sank past the psychologically important point of 7 to the dollar for the first time in more than a decade early Monday, a development Trump saw as an act of economic retaliation against his administration.
"China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation,’" the president wrote on Twitter. "Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!"
A less valuable yuan can the blow of American countermeasures by making Chinese exports cheaper. Frustrated with the state of trade negotiations between the two sides, Trump said Thursday he would expand tariffs to virtually all imports from China on September 1.
American officials have long warned China that weakening its currency would undercut American producers. The Treasury Department found in May that no country met the criteria to be labeled a currency manipulator, but said it was closely monitoring China and eight other trading partners for such actions.
The weakening yuan will likely cast another layer of uncertainty on US-China trade talks, which aren’t set to resume in person until after Trump’s proposed escalation is scheduled to take place.
In May, the Commerce Department said it planned to expand punitive measures for any country found to unfairly wield its currency in the global market. But Trump has suggested in recent months the US artificially weaken the dollar, a move that would be similarly precluded by international agreements.
The White House and the Treasury Department did not respond to emails requesting comment.
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Source: Business Insider – gheeb@businessinsider.com (Gina Heeb)