The US has officially named China as a "currency manipulator" after the Chinese central bank allowed the renminbi to fall below a key threshold, as tensions between the world's two largest economies escalate.
The People's Bank of China allowed its currency to fall below 7 yuan to the American dollar, which is considered to be a psychologically important marker, for the first time in a decade. The move was seen as a retaliatory measure following Trump's threat to slap a 10% tariff on $300bn of Chinese goods. The drop caught markets off-guard as Beijing usually supports the currency.
China dropped the price of their currency to an almost a historic low. It's called "currency manipulation." Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!— Donald J. Trump (@realDonaldTrump) August 5, 2019
The US Treasury unveiled its decision after financial markets closed on Monday. It came just hours after President Donald Trump again accused China of weakening its currency to create an unfair trade advantage.
"In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past," the Treasury Department said in a statement that followed the People's Bank of China's decision to let its currency, the renminbi, fall to the lowest level in more than a decade.
US Treasury Secretary Steven Mnuchin made the determination acting "under the auspices of President Trump," the department said. Mnuchin will now "engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China's latest actions," it added.
The US has not labeled a country a currency manipulator since it tagged China in the early 1990s, under President Bill Clinton. Designating a country does not immediately trigger penalties, but it is seen by other governments as a provocation.
In an editorial in the People's Daily, the official newspaper of the Chinese Communist party, China accused the US of "deliberately destroying the international order" and holding its own citizens hostage. Without mentioning Donald Trump or Washington's accusations of currency manipulation, it said: "Today some in America are obsessed with American privilege to the point of destroying international rules and the international system … These Americans need to wake up!"
"The responsibility of big countries is to provide the world with stability and certainty while creating conditions and opportunities for the common development of all countries," according to the editorial.
"But some people in the United States do just the opposite," it added.
The currency move marks the latest serious deterioration in relations between the US and China and will further inflame will inflame a year-long trade war with China . Trump has already attacked Beijing for reneging on what he claims was a promise to buy more agricultural goods from the US, a claim Chinese authorities dispute.