US refrains from labeling China a currency manipulator

The US Treasury Department passed on the chance of labeling China a currency manipulator on Tuesday.

America's currency watchdog took the decision despite President Donald Trump’s repeated complaints that Beijing weakens the renminbi in order to gain the upper hand on the US in trade.

Although it did not label China as a manipulator, in its semi-annual foreign-exchange report to Congress, the Treasury did expand the number of countries under scrutiny for possible FX manipulation from 12 to 21. Ireland, Italy, Vietnam, Singapore and Malaysia joined China, Japan, South Korea and Germany on its watch list for manipulation.

The decision not to formally accuse China may help cool tempers in the ongoing trade war between both countries.

Nevertheless, the Treasury Department made clear it had “significant concerns” about Beijing’s currency practices, criticising the Chinese government for what it said was a lacking of transparency. The Treasury is tasked with deciding whether a country is an official currency manipulator based on bilateral trade deficits and other potential indicators that a country is depressing its currency

“The outsized magnitude of the bilateral deficit is a result of China’s persistent and widespread use of non-tariff barriers, non-market mechanisms, state subsidies and other discriminatory measures that are increasingly distorting China’s trading and investment relationships,” the report said.

“These practices tend to limit Chinese demand and market access for imported goods and services, leading to a wider trade surplus.”

Although good news for China, the decision remained but a drop of water in a sea of trade tensions after Trump recently hiked its tariffs on Chinese exports earlier in May, threatening to cut-off wireless-equipment maker Huawei Technologies Co. from its US suppliers.

China retaliated with its own tariffs on goods shipments from the US and just the day before lashed out at Washington during a meeting at the World Trade Organization over the blacklisting of Huawei, accusing the US of abusing national security exceptions to global trade rules.

The Chinese official said Washington should “immediately lift all unilateral sanction measures against Chinese companies.”

But at the weekend, during a state visit to Tokyo, Trump had said the US wasn’t ready to ink a trade deal with Beijing, adding that American tariffs on Chinese goods “could go up very, very substantially, very easily.”