China’s decision to devalue its currency has generated new material for Republican Donald Trump in his presidential run, while also stirring up the politics surrounding President Obama’s effort to pursue a Pacific nation trade deal.
The 3.5 percent drop in the yuan over the past two days, which brought it to the lowest value relative to the dollar since 2011, was meant to address rising fears about Chinese growth and equity markets. But the People’s Bank of China’s decision to change its reference rate guiding trading of the currency also played right into the hands of Trump, who currently leads polls for the Republican presidential nomination.
It “is shocking they can get away with this,” Trump said Wednesday in an appearance on CNN.
At least one other candidate for president, South Carolina Republican senator Lindsey Graham, made an issue of China’s devaluation. But while others were silent on the matter, Trump sought to exploit fears about China taking advantage of the U.S. in interviews and on social media.
“They’re just destroying us,” Trump said of China in a CNN interview Tuesday.
“It’s going to be devastating for us,” he said of the devaluation, adding that “our companies cannot compete with China.”
By lowering the value of its currency, China has effectively lowered the cost of imported Chinese goods, and raised the cost of U.S. exports for Chinese consumers. U.S. manufacturing has already suffered in 2015 from a strong dollar.
Trump has tapped into concerns about the decades-long trajectory of U.S. manufacturing and made strident rhetoric about China and American competitiveness a signature of his political campaign.
In one memorable instance in his 2011 flirtation with a presidential run, Trump railed against Chinese trade practices in a speech in Las Vegas, suggesting a 25 percent tariff in response to their trade practices. “Listen, you motherf—–s, we’re gonna tax you 25 percent,” he said.
This week’s currency movements also drew renewed calls for legislation to crack down on currency manipulators, especially from legislators critical of the White House’s push for the 12-nation trade deal known as the Trans-Pacific Partnership.
High-profile lawmakers, such as House Ways and Means Committee ranking member Sander Levin, D-Mich., suggested that the episode showed the need for enforcement mechanisms for cracking down on currency manipulators in a customs bill near the top of Congress’ schedule when it returns from August recess.
“It’s no surprise that currency manipulation remains a concern; that’s why we included strong currency provisions in TPA and the House customs bill,” said Brendan Buck, a spokesman for the panel’s chairman Paul Ryan, a Republican and lead proponent of the trade agreement.
A Treasury spokesperson said that “while it is too early to judge the full implications of the change in the PBOC reference rate, China has indicated that the changes announced today are another step in its move to a more market-determined exchange rate.”
“We will continue to monitor how these changes are implemented and continue to press China on the pace of its reforms, including additional measures to transition to a market-oriented exchange rate,” the spokesperson added. “It is remains critical that China pursue policies that reflect its stated desire to move towards an economy driven primarily by household demand rather than exports, which is in China and America’s best interests. Any reversal in reforms would be a troubling development.”
But some in the domestic manufacturing industries believe that there’s plenty of evidence already that China is artificially lowering the value of its currency.
“The latest intervention once again demonstrates that China’s government is in charge of the exchange rate, not market forces. Perhaps what’s most disappointing is that this action follows years of the Obama administration patting China on the back for their ‘progress,'” said Taylor Garland, spokesperson for the Alliance for American Manufacturing, a group representing manufacturers and the United Steelworkers. “Without enforceable currency provisions in the TPP, any member country could follow China’s lead and devalue their currencies without consequence.”
