Trump’s Trade Adviser Navarro Warns Against Chinese Currency Manipulation

President Donald Trump and White House trade adviser Peter Navarro check out the new Endurance all-electric pickup truck on the south lawn of the White House in Washington on Sept. 28, 2020. Tasos Katopodis/Getty Images

Incoming Trump administration senior counselor for trade and manufacturing Peter Navarro told Reuters on Dec. 12 that the new Treasury Department would not take lightly Chinese attempts to manipulate its currency.

In 2019, the first Trump administration declared China a currency manipulator, the first such designation since 1994, but revoked the status a year later. Beijing has rejected the claim.

“I don’t believe the Trump Treasury Department would welcome Chinese currency manipulation very fondly,” Navarro said. “The history of China as a currency manipulator is well-known.”

Navarro was also a senior trade adviser in the first Trump administration.

He said the White House would not interfere with the incoming Treasury Department’s currency review.

Treasury Secretary Janet Yellen said on Dec. 11 on Bloomberg Television that the United States would react strongly to foreign currency manipulation.

“We are not approving of countries that attempt to manipulate their own currencies to try to gain a competitive advantage and we’re very attentive and react strongly when we see countries manipulating their currencies to try to retain an advantage,” Yellen said, not referring to any specific country.

Reuters has reported that Chinese authorities are considering weakening the yuan in anticipation of new tariffs imposed by a second Trump administration.

President-elect Donald Trump has previewed 60 percent tariffs on all Chinese imports, an additional 10 percent for Beijing’s reneging on agreements related to illegal immigration and illicit fentanyl control, and 100 percent tariffs on countries that try to oust the U.S. dollar.

If the yuan depreciates, Chinese exports would become cheaper, lessening the impact of U.S. tariffs on China.

Sources spoke with Reuters on the condition of anonymity, and official agencies did not comment. Chinese Communist Party (CCP) officials did, however, say at a recent high-level meeting that it would adopt “appropriately loose” monetary changes next year for the first time in 14 years.

HSBC’s chief Asia economist, Fred Neumann, said the devaluation could have a ripple effect, leading other nations to impose restrictions on Chinese imports, which could hurt the Chinese economy.

Analysts already estimate the yuan to fall against the dollar next year, with rates varying and tied to the impact of U.S. tariffs.

In 2019, then-U.S. Treasury Secretary Steven Mnuchin engaged with the International Monetary Fund to offset currency manipulation by Beijing. Designating China a currency manipulator allowed the department to take measures, such as blocking foreign nations from government procurement contracts.

The Treasury Department said in an August 2019 statement that China has a long history of large-scale currency manipulation and was found to engage in the practice to gain “an unfair competitive advantage in international trade.”

The department pointed to a public statement from China’s central bank, the People’s Bank of China, in which Chinese authorities said they had ample tools to influence the foreign exchange market, finding it an open admission that Beijing had been manipulating the yuan against the dollar and intended to continue doing so.

The Chinese yuan dropped 1.4 percent on Aug. 5, 2019, days after Trump announced 10 percent tariffs on $300 billion worth of Chinese imports.

Reuters contributed to this report.