March 7, 2021

US accuses China of "currency manipulation" and threatens retaliation

The US Department of the Treasury on Monday, it designated China as a "currency manipulator" country and threatened to retaliate to end its "unfair" competitive advantages under the International Monetary Fund (IMF), which is a new escalation in the commercial war.

In a statement, the Treasury said its secretary, Steven Mnuchin, "will act with the International Monetary Fund to eliminate the competitive advantage created by China's latest actions."

The Treasury took that measure after, on Monday, the People's Bank of China (central CPB) dropped its currency, the yuan, so that to buy a dollar now seven yuan is needed, which is the breaking a psychological barrier for investors and something that has not happened since 2008.

In the Treasury’s judgment, "The purpose of the devaluation of China's currency is to obtain an unfair competitive advantage in international trade."

He also considered that the "pattern" of Beijing's actions to devalue its currency is a violation of the commitments it has reached in the framework of the G20 leaders' meetings.

And finally, the Treasury once again urged the Government of Chinese President Xi Jinping to "improve the transparency of the exchange rate and the operations and objectives of reserve management."

The Treasury decision, one of the biggest forms of sanctions that that department can impose on a country, comes only hours after the president of the United States, Donald Trump, accused Beijing of "currency manipulation" and urged the Federal Reserve (Fed) to take action in this regard.

"China dropped the price of its currency to a record low. It's called 'currency manipulation.' Are you listening, Federal Reserve (Fed)?" Trump said in a series of messages on Twitter.

The fall of the yuan occurred after last Thursday Trump indicated that he would impose tariffs of 10% on products of the Asian giant valued at 300,000 million dollars as of September 1, in the absence of progress in trade negotiations.

Soon after, the Chinese Ministry of Commerce responded by announcing that it would take "countermeasures."

A weaker yuan means that Chinese dollar-denominated products are cheaper, something that would help curb the negative effect of the new US tariffs on their competitiveness, although the price to be paid will be an increase in the cost of imports.

This new escalation in the commercial war between China and the US caused significant declines in international financial markets, such as the London Stock Exchange, which closed with losses of 2.47%; that of Paris with 2.19%; Frankfurt, with 1.8%; that of Milan, with 1.3% and the Spanish with 1.35%.

Wall Street closed this Monday with the highest percentage losses of the year in its three indicators, of 2.90% in the case of the Dow Jones of Industriales, the main one. EFE

. (tagsToTranslate) relations united-china

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