A few months after Donald Trump launched his campaign for the US presidency in 2015, he wrote in an opinion piece that one of the first things he would do, on “day one” in the White House, would be to label China as a currency manipulator. He didn’t, and nor did he follow through with a threat to apply the label in his first 100 days.
At no stage in Trump’s presidency has China, or any other country, met the technical criteria required for a formal designation as a currency manipulator. However, on 5th Aug, the People’s Bank of China (PBOC) — which has been supporting, rather than weakening its currency for the past few years — allowed the yuan to slip below 7 yuan to the dollar, a threshold that has remained in place for more than a decade.
The central bank played down the significance of the move, saying that the threshold was “not a dam” that, having been broken, would not be rebuilt. Instead, the PBOC said, it “is more like the level of a reservoir … it is normal for it to rise and fall.”
A formal designation of China as a currency manipulator followed, with the threat of further tariffs. That sparked fears — reflected by share-market turmoil worldwide — that the trade war was about to shift gear into a currency war of competitive devaluations.