US Treasury Declares China a Currency Manipulator Under Orders From Trump


It's now official. The US Treasury says China is a currency manipulator. What's next?

Futures are reeling again, after hours, on news the US Treasury says China is a currency manipulator. As I type (6:40 PM central), the S&P 500 is down another 46 points.

That's 1.7% on top of a 3% decline on Monday.

Currency Manipulation?

In my way of thinking, China is a currency manipulator along with Japan, the ECB, and of course the US.

To me, QE, interest rate cuts, and direct intervention all strive to do the same thing: lower currency valuations.

However, I am not the official designator of the term.

China Not a Currency Manipulator

Officially, Trump is a Liar

Even though I believe China is guilty, so is the US. That's merely my opinion.

More importantly, by official definition, Trump is a liar.

Anger Response

Where To Next?

Just One Problem

Three Currency Manipulation Rules

The Wall Street Journal reports U.S. Designates China as Currency Manipulator

The decision to label China as a currency manipulator for the first time since 1994 comes just four months after the U.S. Treasury passed on an opportunity to make such a formal designation as part of its semiannual currency report.

Treasury uses three criteria to apply the designation: actively intervening in their currency markets, having large trade surpluses with the U.S., and having large overall current-account surpluses.

Three Criteria

  1. Significant bilateral trade surplus with the United States
  2. Material current account surplus
  3. Country engaged in persistent one-sided intervention in the foreign exchange market

Test Three Fails

China fails test number two outright. It fails test three on a percentage basis.

China has a huge trade surplus with the US but China does not have a "material current-account surplus".

Heck, China may not have any currenty account surplus.

Morgan Stanley says China's "current account shortfall could be 0.3 percent of its GDP, and slip further to 0.6 percent in 2020."

The US Treasury has to understand this whether or not Trump gives a damn.

Flashback May 29, 2019

Please recall my May 29 post US Treasury Concludes "No Currency Manipulators", Watch List Expands to 9

The Treasury has three requirements for identifying currency manipulators. Seven countries meet two criteria. No country met all three criteria. Only Singapore met condition 3, but it did not meet condition 1.

Question of the Day

How soon will Trump propose modifying the rules so he can claim China is a currency manipulator?

Question of the Day Answered

My question of the on May 29 has now been answered.

Trump does not give a damn about rules, he simply instructed the Treasury to break them.

Totally Lost

Trump has totally lost it.

Destructive anger has set in.

Recession Coming Up

A Recession Watch is On.

At this juncture, it's too late to stop.

Trump will blame the Fed and the Fed will blame Trump.

Mike "Mish" Shedlock

Comments (21)
No. 1-18

Anyone remember what China did to the yuan in April 1994? They unilaterally devalued it 33% and wrecked their southeast Asia trading 'partners' economies.

If I were negotiating with them, I wouldn't put too much stock in their reluctance to do whatever it takes to keep the CCP on top of the tiger today.


I'm just glad our own Federal Reserve would never engage in anything as underhanded as currency manipulation. For shame!


Mish: "At this juncture, it's too late to stop."

As a trader, I have been watching for the "tipping point". I suspect it has arrived. As one analyst cited today said, on Friday Trump "threw a switch."


The Federal Reserve has a great chance to unwind its position in US government bonds and force the Chinese to take losses. The USD would certainly strengthen, but that would attract capital investments from around the world. Companies don't have to pay interest on shares, but they do on debt, so corporate debt could be paid down.


The assault on savers is about to be renewed in earnest. Powell tried to play it straight. He opposed QE3, cautioning in Fed minutes that "even $4.3 trillion won't be enough for Wall Street." Obviously, he was right but has run out of time in getting the Fed's balance sheet back in order.

The latest currency race to the bottom is underway and Powell has our boat still tied up at the dock.

The way Trump could really help would be to declare that we also will do "whatever it takes" to not be suckered by central bankers anywhere again and offer his help in getting the world backed out of Nixon's "TEMPORARY" abandonment of the gold standard.

Fiat currencies didn't work; neither will leaving the candy store keys in the hands of three yearolds.

Ted R
Ted R

In reference to the Kyle Bass Tweet: I wouldn't bet against Kyle Bass. Not on the China currency situation, play, or bet. Bass is good at making accurate bets/trades. He has been all over China and its currency problems for a few years now.


The Kyle Bass interview clearly shows how they are trying to prop up the Yuan not devalue it. He also mentions how the Chinese are negotiating a trade deal in bad faith and even though Trump is being a belligerent butthole about trade via his annoying tweets. According to him it appears the Chinese are completely unreasonable about negotiating.


From The Economist:

“Odd as it may seem, the president is convinced that foreigners try to take advantage of America by undercharging it for their wares.”


Trump declared a national emergency to usurp wall funding Trump is using currency manipulator as a tool to gain leverage against China. It need not be true And I more than suspect it is not. By Trump's definition U.S. manipulates its currency as well


No nation has ever devalued its currency to prosperity.


I can't see the Chinese wanting to be seen to do what is demanded, now more likely to remove props under Yuan.

Chinese deflation exported into existing global recession = high probability of depression. Very dangerous.

Unemployment takes off with increased real cost of living as necessities not impacted, only trinkets and baubles. Ordinary folk pummeled.

More NIRP/ZIRP will make no difference when demand just isn't there and all that happens is savings/capital is depleted still further in order to survive.

Debt burdens would increase but just accelerates to the finale of massive defaults.

A black hole awaits that will suck the world in.


Trump knows one tactic, brinkmanship but by definition it can't work 100% of the time and eventually the other side calls a bluff. It's really a stupid policy. From Trump's own personal experience he's not been successful in business 100% of the time and has had some abysmal failures along the way. The stakes are simply too high to go to the brink on trade and repeatedly.


The guy who lost money on New York real estate and casino gambling -- about as close to a sure thing as there is in business -- is now in charge of a global tariff, trade and currency war. Now that's comforting.


criteria highly subjective, Germany also meets criteria 1 and 2. Trump is having a Erdogan moment.

Tony Bennett
Tony Bennett

If China chooses to prop/defend (or risk capital flight) ... need to watch cash burn.

A few years ago, iirc, they went thru $100 billion or so a month of foreign reserves in prop ... and that was when yuan stronger and global economy sounder.


Now, what could possibly be more economically useful in Idiotopia, than one gaggle of privileged, half literate nothings "declaring" another one a boogeyman? "We" must now all take sides, pump our fists for the dimbullbs and cheer!!


China wanted to play hardball. They thought they were dealing with another obama, Bush or Clinton who would fold at the first sign of trouble. They have had it so good for so long - they came to always expect it.

Next stop. Removing China's Most Favorite Nation Status and kicking them out of the WTO.

China has a $350 billion trade surplus/year with the United States, plus insane rules for stealing intellectual property and "partnering" to import anything into their country. Instead of giving a little and keeping 80% of what they had - they are risking of losing it all.

And remember - China can't even feed itself will face riots if food prices rise too fast and/or unemployment hits when their large economic growth starts to lag.


I’m still searching for the “Deflation Clause “ in the doctrine of Modern Monetary Theory. Might be in the aviation section under “Helicopter.”

Global Economics