Obvious Tool
A Treasury spokesperson didn’t immediately respond to requests for comment.
The impact of such a designation could reach beyond markets as well. Given China’s relatively modest current-account surplus and lack of intervention in FX markets, there is no basis to name the country a manipulator, according to former U.S. Treasury official Mark Sobel. Doing so could further sour ongoing U.S-China negotiations, he cautioned.
“Lacking merit, it would undermine the longstanding integrity and rigor of the FX report,” said Sobel, U.S. chairman of the Official Monetary and Financial Institutions Forum. “Furthermore, it could very well complicate Secretary Mnuchin’s welcome and laudable efforts to maintain a dialog with senior Chinese leadership.”
While the Treasury has refrained from labeling the Asian nation a manipulator three times under Trump, the U.S.-China trade relationship has deteriorated since the report’s last release in April. The U.S. imposed tariffs of 10 percent on $200 billion of Chinese goods last month, with a promise to increase the levy near year-end. Beijing retaliated, imposing duties on $60 billion of U.S. imports.
“Tensions between the U.S. and China have gone up and you’ve seen Trump utilize other avenues in this ongoing escalation, so I think the use of this as a tool seems obvious,” said Daniel Hui, an analyst at JPMorgan Chase & Co. “Given where we are now in this relationship, I don’t think it’s controversial to say there’s a higher probability that he’ll take this step, this time.”
This article provided by Bloomberg News.