Trump Warns Japan, China Against Devaluing Their Currencies

The president hints at making up for America’s disadvantage with the tariffs.

This photo illustration shows Japanese ¥10,000 notes. Richard A. Brooks/AFP via Getty Images

President Donald Trump said he has warned leaders of Japan and China against devaluing their currencies to gain an unfair trade advantage.

“I’ve called ... [Chinese leader] Xi [Jinping], I’ve called the leaders of Japan to say: ‘You can’t continue to reduce and break down your currency. You can’t do it because it’s unfair to us,’” the president said on Monday at the White House as he signed an executive order doubling tariffs on Chinese imports, from 10 percent to 20 percent. He didn’t specify when these conversations took place.

“You can’t do it because it’s unfair to us. It’s very hard for us to make tractors [by] Caterpillar here when Japan, China, and other places are killing their currency, meaning driving it down,” he continued. “So all of these things add up, and the way you solve it very easily is with tariffs.

“Look, let them do that, and we make up for it with the tariffs.”

Tokyo’s foreign exchange market reacted to Trump’s comments with a surge in buying yen, briefly pushing the Japanese currency to around mid-¥148 per U.S. dollar on Tuesday morning. Some yen selling later occurred, bringing the exchange rate to ¥149 per dollar by 5 p.m. local time, still stronger than the previous day’s rate.

At a press conference after a cabinet meeting on Tuesday, Japanese finance minister Katsunobu Kato dismissed the notion that Japan was deliberately weakening the yen.

Kato highlighted how Tokyo had intervened in the foreign exchange market multiple times in 2022 and 2024, when the yen hit a 38-year low of nearly ¥162 per dollar. To counter the depreciation, the Japanese government sold dollars and bought yen, a move confirmed by a U.S. Treasury report estimating that Japan offloaded ¥9.8 trillion ($62 billion) in two separate interventions last April and May, followed by another ¥5.5 trillion ($35 billion) in July.

Kato also affirmed that Japan will continue to honor the exchange-rate commitments it has made in the G7 Summit and at a bilateral talk with U.S. Treasury Secretary Scott Bessent on Jan. 29.

Japan is on the Treasury’s “Monitoring List” of major trading partners subject to heightened foreign exchange scrutiny. In its latest report from November, the department noted that Japan maintained a $65 billion trade surplus with the United States during the review period and saw its global current account surplus rise to 4.2 percent of GDP from 2 percent a year earlier.

While the Treasury acknowledged that Japan’s currency interventions were transparent, it reiterated that such measures should only be taken in “very exceptional circumstances with appropriate prior consultations.”

When it comes to China, the Treasury noted that while China’s current account balance had declined slightly, to 1.2 percent of GDP, its export volumes had risen significantly, indicating a decline in export prices. The November report reiterated a call for more transparency in China’s foreign exchange practices, including only allowing the Chinese yuan to rise or fall 2 percent on either side of a “daily fix” without official explanation.

In 2019, Trump ordered the Treasury to designate China as a currency manipulator, only to drop that label a few months later as Washington and Beijing reached a trade deal committing the latter to buying an additional $200 billion of U.S. goods. An analysis by the Peterson Institute for International Economics suggests China purchased about 60 percent of what it agreed to.

Bessent, who called the Chinese economy “the most imbalanced, unbalanced economy in the history of the world” during his Senate confirmation hearing, has not yet indicated whether the United States will reapply the currency manipulator designation. If reinstated, China could face potential sanctions, including barring Chinese firms from competing for U.S. government contracts.