(Aug 12): US President Donald Trump has been hoisted by his own petard. He has been harmed by his own plan to harm someone else. Earlier this week, he declared China a currency manipulator at a time when he was desperate for China to actually be a currency manipulator.
Seems contradictory? Not really when the issues are pared to the essentials. The foundation of Trump’s tariff policy is for the renminbi to remain under the critical level of 7 to the US dollar. At these levels, the US tariffs inflict some real pain on Chinese exporters and so make Trump’s tariff policy more effective.
However, as most independent observers and analysts agree, the reasonable market-driven level for the renminbi is around 7.6. Some suggest 8. In a free market float of the renminbi, many suggest it would settle around the 7.6-to-7.8 level. Renminbi sentiment indicators all point to offshore pressure, not manipulation.