Markets are hard

13 April 2017 By Gina Chon Follow @GinaChon

The U.S. president no longer wants to label Beijing a currency manipulator. He belatedly learned the yuan hasn’t been purposely devalued for a while. He’s also warming to the dovish Janet Yellen and the Export-Import Bank. As with healthcare, he seems to be learning on the job.

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President Donald Trump told the Wall Street Journal on April 12 that China hasn’t been manipulating its currency for months and he also doesn’t want to jeopardize his relationship with Beijing, whose help he needs on combating the North Korea threat. The U.S. Treasury Department will not label China a currency manipulator in its latest report on the foreign-exchange practices of major trade partners, which is due April 15. During Trump’s campaign, he repeatedly promised to impose the currency-manipulator label on China on “day one” in office.

Under the U.S. Trade Facilitation and Trade Enforcement Act of 2015, a country can be labeled a currency manipulator if it meets three criteria. These include having a significant bilateral trade surplus with the United States, having a material current-account surplus, and engaging in persistent, one-sided intervention in the foreign-exchange market. If a country is found to have met those conditions, Washington would start negotiations to reduce those practices. If there is no progress after one year, the United States could impose several penalties such as excluding the country from government procurement contracts and calling for heightened surveillance by the International Monetary Fund.

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