trump visits china Thomas Peter-Pool/Getty Images

Trump’s Currency Confusion Continues

Ever since the 2016 US presidential campaign, Donald Trump has falsely accused the Chinese of keeping the renminbi artificially weak. But the fact is that Trump's own economic policies are driving up the value of dollar – an outcome that would have been foreseen by anyone with a basic understanding of economics.

CAMBRIDGE – Next month, the US Department of the Treasury is due to submit to Congress its biannual report detailing which countries, if any, are manipulating their currencies to gain an unfair trade advantage. For his part, President Donald Trump is already accusing China of doing so, as he did throughout the 2016 election campaign. And he is reportedly trying to influence the Treasury Department’s deliberations.

What has changed since the last report in April? That document, like similar reports written during the previous two administrations, did not find China guilty of manipulation. In fact, the last time the Treasury Department declared China (or anyone else) a manipulator was in 1994.

The reason for this is simple: China does not meet the three criteria that Congress has set for determining currency manipulation. It has not been persistently intervening in foreign-exchange markets (at least not to push down its currency), and it is not running an overall current-account surplus greater than or equal to 3% of GDP (its surplus in 2017 was 1.3%).

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