LATIMES.COM TUESDAY, AUGUST 6, 2019A
Trump immediately ac-
cused China of being a “cur-
rency manipulator” and his
Treasury secretary, Steven
T. Mnuchin, officially made
that determination in the
evening. In doing so,
Mnuchin cited the Omnibus
Trade and Competitiveness
Act of 1988, and said the
Treasury would turn to the
International Monetary
Fund to get involved.
Analysts said, however,
there was no hard evidence
that China had intervened
to gain a competitive trade
advantage or sought to
“weaponize” its currency, as
some alleged. Instead, ex-
perts said the Chinese cur-
rency probably had weak-
ened because of market
forces, partly as a result of
Trump’s new tariff threats
and China’s economic slow-
down.
What’s more, based on
2015 U.S. legislation guiding
the Treasury’s criteria for
determining a country’s ex-
change rate practices, China
does not meet the definition
of a currency manipulator.
And in fact, Treasury’s most
recent semiannual report in
May on international ex-
change rate policies did not
find China as a currency ma-
nipulator.
According to Bergsten,
who with his colleagues at
Peterson has extensively
studied China’s currency
practices, Beijing was guilty
of manipulating its currency
from 2003 to 2013, but no
longer. Past administrations
did not label China a ma-
nipulator to avoid publicly
embarrassing Beijing, which
officials viewed as being
counterproductive.
Nonetheless, Trump
blasted China on Monday
and suggested that the Fed-
eral Reserve, which last
week cut interest rates
partly because of trade wor-
ries, should intervene to
counter the Chinese move —
raising the specter of a cur-
rency war.
Trump stopped short,
however, of ordering
Mnuchin to take steps to in-
tervene in currency markets
to weaken the dollar. And
China’s central bank said
Monday that it is confident
in its capability to keep the
yuan’s exchange rate basi-
cally stable, according to the
Xinhua news agency.
Still, the increased ten-
sions and fears of more tit-
for-tat measures hammered
financial markets on Mon-
day and ricocheted to Eu-
rope and in Asia on Tuesday.
After weeks of hovering
at record levels, the Dow
Jones industrial average fell
as much as 961 points Mon-
day afternoon before ending
the day down 767 points.
That was still the worst
drubbing this year, the sixth-
largest point drop in Dow
history, and the fourth
straight session of losses
that now total nearly 1,
points.
Dow futures sank furtherafter news of the Treasury’s
designation.
“I’m worried because
now the risk of further esca-
lation seems greater,” said
David Dollar, a senior fellow
at the Brookings Institution
and formerly the World
Bank’s country director for
China. “The Chinese seem
committed to retaliating to
each move, but then you
might have the U.S. raise the
latest round of tariffs to 25%
or maybe increase some be-
yond 25%.”
Dollar added: “I think
this escalation is very bad for
the world economy.”
Global trade and econo-
mic growth already have
been slipping, thanks in part
to the U.S.-China trade war.
Although the American
economy has been perform-ing relatively well, with solid
job growth and consumer
spending, there’s concern
the global slowdown and de-
teriorating trade relations
with China — the world’s
second largest economy —
will further erode U.S. busi-
ness sentiment and under-
mine the nation’s record-
long economic expansion.
Trump did not say what
further actions he might
take. But in tweets Monday,
the president took aim at
China for its trading prac-
tices, alleging Beijing “has
always used currency ma-
nipulation to steal our busi-
nesses and factories, hurt
our jobs, depress our work-
ers’ wages and harm our far-
mers’ prices.”
Any move on the part of
Beijing to target U.S. agri-cultural products as part of
its retaliatory action is likely
to add fuel to the fire. Ameri-
can farm goods have been a
major point of contention in
the trade war, with China
having diverted billions of
dollars of soybean pur-
chases from the United
States to South America.
China’s state-run news
agency said Monday that
Chinese firms had sus-
pended purchases of U.S.
farm goods in response to
Trump’s plan to step up tar-
iffs. Trump has provided two
rounds of financial relief to
American farmers, an im-
portant base of political sup-
port.
Trump’s backers and
China hawks applauded the
president for his actions.
“The markets are goingto go up and down, but we
need to be very tough,” said
Dan DiMicco, a former top
steel executive who advises
Trump’s trade officials.
He called on Trump to
ratchet up tariffs even fur-
ther on Chinese goods and
for the Fed to keep cutting
rates, as the president has
repeatedly demanded.
But analysts said the Fed
doesn’t want to be seen as
enabling Trump to carry out
his aggressive trade policies
by lowering rates and soft-
ening the blow to markets.
At the same time, the
central bank wants to keep
the U.S. expansion going,
and last week it nudged
down rates for the first time
since 2008 mainly because of
threats from trade and glob-
al turbulence.U.S.-China trade battle worsens
[Trade, from A1]
THE DOW JONESindustrial average fell as much as 961 points on Monday afternoon before ending the day down 767 points.Richard DrewAssociated Press