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Trump accuses China, EU of currency manipulation
WASHINGTON, July 21, 2018 (BSS/AFP) – President Donald Trump on Friday
launched a fresh attack on American trading partners, saying the EU and China
were manipulating their currencies, and he threa
tened to hit all imports from China with high tariffs.
The comments also signaled an undiminished appetite for battle on multiple
fronts after a week dominated by coverage of the fallout from his dealings
with Russian President Vladimir Putin.
The harsh comments took fresh aim at pillars of the international economic
system and underscored Trump’s break with long-established norms by again
openly rebuking the Federal Reserve for raising interest rates.
The outbursts were another crosswind for Wall Street, which struggled to
find direction and finished the day a hair’s breadth in negative territory.
In a pair of tweets, Trump said China, the European Union and others had
been “manipulating their currencies and interest rates lower” while the US
dollar strengthened, eroding “our big competitive edge.”
He said the Fed’s course of tightening monetary policy now “hurts all that
we have done.”
The Fed has raised the benchmark lending rate twice this year after three
increases in 2017 and two more rate hikes are expected this year as the
central bank removes stimulus from the economy to keep a lid on inflation.
The chance inflation might accelerate has increased after the massive tax
cut Trump championed last year, which has raised the US debt and budget
deficit.
He again said he was willing to ramp up his attacks on China, potentially
imposing punitive tariffs on all of the $505.6 billion in goods imported from
that nation.
“I’m ready to go to 500,” Trump said in a CNBC interview that was broadcast
Friday. “We’ve been ripped off by China for a long time.”
The White House in June already threatened to extend punishing US duties
progressively to up to $450 billion in Chinese imports. Steep tariffs already
are in place on $34 billion in Chinese goods, and a second tranche of $16
billion in products is under review and could soon be added.
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Washington also is now targeting another $200 billion in imports which see
fresh tariffs imposed as soon as September.
Beijing has vowed to hit back dollar-for-dollar and accused the United
States of starting the “largest trade war in economic history.”
– Escalating trade fight –
In the CNBC interview broadcast Friday, Trump reiterated his claim that the
United States is “being taken advantage of” on issues including trade policy.
The US-China spat is the largest and broadest of several trade fights
picked by Trump.
The growing share of international trade under threat — including the
tariffs on autos and auto parts now under consideration — could harm the
global economy by disrupting manufacturing supply chains, raising prices and
causing firms to hold off on new investments.
In the CNBC interview, Trump also said he was “not happy” the Fed planned
to continue raising benchmark lending rates.
“I’m not thrilled,” he said. “Because we go up and every time you go up
they want to raise rates again.”
He likewise also took aim at the dollar, saying a higher value “puts us at
a disadvantage” and adding that the Chinese yuan “has been dropping like a
rock.”
“The US should be allowed to recapture what was lost due to illegal
currency manipulation and BAD Trade Deals,” Trump said on Twitter.
The comments, plus Trump’s criticism of Federal Reserve interest rate
hikes, had sent the dollar tumbling against a basket of currencies.
After sliding recently to its lowest levels in a year in April as the Sino-
US trade conflict heated up, the yuan strengthened to around 6.77 by the
close Friday.
Despite Trump’s claim, the yuan has been rising steadily if gradually in
recent years, as most economists and officials say Beijing actually has been
intervening in currency markets to keep the currency from weakening.
However, analysts said China may be willing to allow further depreciation
as the trade war rumbles on.
“The (yuan’s) slide against the US dollar will substantially cushion the
impact on Chinese exporters from the planned next round of US tariffs,” Rajiv
Biswas, chief Asia economist with IHS Markit, told AFP
The US dollar, meanwhile, continued its decline against the euro and pound.
“Currency is now part of the trade war folks,” said Greg McKenna, chief
market strategist at AxiTrader.
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