US President Donald Trump on Monday accused China of engaging in “currency manipulation” after the yuan broke below the level of seven yuan per dollar, a situation that has not occurred since 2008, and he urged the Federal Reserve to take measures to counter Beijing’s move.
“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” Trump said in the first of a series of Twitter posts on the subject.
The president criticized Beijing for “always” using “currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices.”
“Not anymore!” he tweeted.
Trump has criticized the Fed for allegedly failing to support the strength of the US economy with significant interest rate cuts and called the announcement last week by the US central bank to cut interest rates by 0.25 percent inadequate.
A spokesman with the People’s Bank of China, the country’s central bank, said on the entity’s Web page that the depreciation of the yuan comes as a result of “unilateral trade protectionism, as well as expectations of more tariffs on China,” a clear reference to the latest round in the trade war that Washington and Beijing have been engaged in since March 2018.
The fall of the yuan comes after last Thursday Trump said that he would impose tariffs of 10 percent on some $300 billion worth of Chinese products starting Sept. 1 given the failure of the two sides to achieve progress in the bilateral trade talks.
Shortly afterwards, the Chinese Trade Ministry responded that it would take “countermeasures.”
A weaker yuan means that Chinese products denominated in dollars will be less expensive, something that should help mitigate the negative effect of the new US tariffs on their competitiveness, although the price of those imports to US consumers will rise.
This latest escalation of the trade war prompted significant declines on international financial markets on Monday.
Wall Street extended its initial losses by midafternoon on Monday and the Dow Jones Industrial Average, the main market indicator, was down as much as 960 points, or 3.6 percent, although it recovered by the close of trading to close down “only” about 760 points.