President Trump and Treasury Secretary Steven Mnuchin.Credit:Bloomberg
The pressure from Trump revealed a more forceful West Wing role in the decision. Mnuchin had repeatedly refused to designate China as a currency manipulator because China's currency moves didn't meet the treasury's established criteria for that action.
But Trump exerted immense pressure on him earlier this month,after the Chinese let their currency,the yuan,cross a symbolic threshold that it had not passed in some time.
This came after an escalation in the trade conflict when Trump announced he would be putting a 10 per cent tariff on $US300 billion ($443 billion) in additional Chinese exports,and the Chinese pledged retaliation. (This week,Trump delayed some of those new tariffs out of concern for what they'd to do the US economy during the holiday period.)
The Chinese yuan has been weakening this year,but there have been differing explanations as to why. Trump has said the Chinese government has intentionally weakened its currency to gain an advantage over US companies. When a country weakens its currency,it makes its exports cheaper and more competitive.
But a number of international economic experts have said that the Chinese currency has weakened because of independent market forces,including a worsening of the Chinese economy. The Treasury Department has declined as recently as May to name China a currency manipulator;Trump has raised concerns since before he was president.
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Two federal laws dictate the treasury secretary's power to label countries as currency manipulators. Currency manipulation often draws a strong international response because it can skew currency and trade markets and create distortions in how goods flow around the world.
The federal laws that empower the treasury secretary to label a country a"currency manipulator"are meant to protect the process from political interference,and they set out specific criteria that must be met in order for the designations to occur.