President Donald Trump has long hammered trading partners with accusations of intentional devaluation of their currencies, a practice that can make exports from a country cheaper. But while tariff disputes weigh on the economy ahead of the 2020 elections, he seems to think that the United States should try.
Bloomberg News reported on Wednesday Trump has asked his associates to look for ways to weaken the dollar, a move that experts say would constitute currency manipulation – and that could undermine the credibility of the United States abroad. In interviews with recently announced candidates at the Federal Reserve Judy Shelton and Christopher Waller, the president also asked about the greenback.
The White House declined to comment and the Treasury Department did not respond to a request by e-mail.
Such action would be ruled out by commitments between economic powers and the International Monetary Fund, said Jason Furman, the latest president of the Council of Economic Advisers of the White House led by President Barack Obama.
"The end result of this attempt to weaken the dollar will therefore only weaken our influence the next time we try to prevent another country from manipulating its exchange rate," Furman added. .
Trump grew up more and more frustrated with the strength of the dollar as his administration continues to sign, the "America First" program, imposing punitive duties on major trading partners. Economists have said the dollar has been strengthened in part thanks to policies, including the $ 1.5 trillion tax reduction package passed in 2017.
He has repeatedly accused the Fed, which raised its interest rates in December, and is pressuring the independent central bank to relax its monetary policy. Higher interest rates can strengthen a currency, making exports more expensive abroad and lowering the real cost of imports.
"China and Europe are playing a big game of money manipulation and injecting money into their system to compete with the United States", Trump wrote on Twitter beginning of July. "We should MATCH, or continue to be the dummies who sit and watch politely while other countries continue to play their games – as they have done for many years!"
In its latest report in May, the Treasury Department found no country met the criteria to be qualified as currency manipulator, but said that he was closely monitoring nine of them, including China, for such actions. The Trump administration has separately sought to extend punitive measures to any country found guilty of unfairly exercising its currency on the world market.
It is not clear what specific policy the President had in mind. Any such intervention would not have a significant effect on the dollar but could damage trading relationships abroad, said Kenneth Kuttner, a former employee of the Federal Reserve, today. He is an economist at Williams College.
"Such an intervention would be seen as a blatant attempt to manipulate the value of the dollar – just as we accused the Chinese of doing so for years," he said. "Our trading partners would surely not accept that."