LONDON – A few days ago, US President-elect Donald Trump took to Twitter – his medium of choice – to declare that he did not need China’s permission to contact Taiwan, because China didn’t ask for permission to devalue its currency. At that moment, my hope that the Trump shake-up would be economically beneficial for the United States diminished.
I believe that the developed economies need a jolt to escape their post-2008 malaise and their excessive reliance on easy monetary policy. Given Trump’s propensity for shaking things up, he seemed a good candidate for the job. But if the Trump disruption were actually going to help the US, it would need to focus on economic essentials, rather than simplistic – and often false – populist memes.
Judging by his accusations against China, it seems that Trump is simply stirring the pot and riling up his supporters – not advancing any kind of constructive agenda. After all, any reasonable observer of China – including some of Trump’s own advisers, with whom I have worked in the past – knows that the country has not devalued its currency for some time.
Yes, the Chinese renminbi has declined recently against the dollar, but not as much as the Japanese yen, the euro, or the British pound – and those declines have been driven by relative confidence in the US economy. In any case, the Chinese have a trade-weighted exchange-rate policy, not one based on keeping the renminbi at some targeted level relative to the dollar.