The Washington PostDemocracy Dies in Darkness

Trump pressured Mnuchin to label China ‘currency manipulator,’ a move he had previously resisted

Treasury Secretary Steven Mnuchin on Capitol Hill in January.
Treasury Secretary Steven Mnuchin on Capitol Hill in January. (Melina Mara/The Washington Post)
Placeholder while article actions load

President Trump personally pressed Treasury Secretary Steven Mnuchin to label China as a “currency manipulator” two weeks ago, a move Mnuchin had previously resisted, three people with direct knowledge of the push said.

The pressure from Trump revealed a more forceful West Wing role in the highly controversial decision. Mnuchin had repeatedly refused to designate China as a currency manipulator because China’s currency moves didn’t meet the Treasury Department’s established criteria for that action.

But Trump exerted immense pressure on Mnuchin earlier this month, after the Chinese let their currency, the yuan, cross a symbolic threshold that it had not passed in some time.

This came after an escalation in the U.S.-China trade conflict, with Trump announcing he would be putting a 10 percent tariff on $300 billion in additional Chinese exports and China pledging retaliation. (This week, Trump delayed some of those new tariffs out of concern for what they would to do the U.S. economy during the holiday period.)

‘It could get very serious’: Why some analysts fear a U.S.-China currency war

The Chinese yuan has been weakening this year, with differing explanations as to why. Trump has alleged that the Chinese government has intentionally weakened its currency to gain an advantage over U.S. companies. When a country weakens its currency, it makes its exports cheaper and more competitive.

But a number of international economic experts have said that the Chinese currency has weakened because of independent market forces, including a worsening of the Chinese economy. The Treasury Department had declined as recently as May to name China a currency manipulator, even though Trump has raised concerns since before he was president.

There are two federal laws that dictate the treasury secretary’s power to label certain countries as currency manipulators. Currency ma­nipu­la­tion often draws a strong international response, because it can skew currency and trade markets and create distortions in how goods flow around the world. The laws are meant to protect the process from political interference, and they set out specific criteria that must be met in order for the designations to occur.

In the Aug. 5 designation, Treasury Department officials did not specify what had changed after their May 28 announcement that cleared China. Instead, they pointed to public statements from the Chinese government as a way of affirming an active government role in controlling the currency.

“In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past,” the Treasury Department said. “The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade.”

White House and Treasury Department spokesmen declined to comment.

One of the people with knowledge of Trump’s pressure on Mnuchin said the White House wanted China labeled as a currency manipulator so that it might prod Chinese officials back to the negotiating table. This has proved unsuccessful so far. Instead, it has inflamed tensions between the countries.

The three people spoke to The Washington Post on condition of anonymity because they were not authorized to reveal the discussions.

As a practical matter, labeling China as a currency manipulator simply begins a process of discussions between the Treasury Department and the International Monetary Fund, though the IMF has declined to agree with the designation.

Trump has increasingly complained that the strong U.S. dollar is hurting the U.S. economy. He has blamed this dynamic both on the Chinese government and the Federal Reserve, though many businesses and investors have said it is a result of the White House’s adversarial trade agenda.