The US has officially designated China as a currency manipulator.This decision was taken after China’s central bank allowed the yuan to weaken in retaliation for new US tariffs.
A weaker yuan makes Chinese exports more competitive or cheaper to buy with foreign currencies.
The US Treasury department defines currency manipulation as when countries deliberately influence the exchange rate between their currency and the US dollar to gain unfair competitive advantage in international trade.
The US has said that it will now engage with the International Monetary Fund (IMF) to eliminate the unfair competitive advantage created by China’s latest actions.
It’s the first time that the US has labeled a country a manipulator since the 1990s when China was also the target.Officially,the designation requires the US government to seek negotiations with the government accused of manipulation.
However,the US and China have been locked in a trade war since 2018 that has spilled into areas such as technology and now currency.