President Trump’s new treasury secretary appears to have contradicted his boss over one of the president’s more vocal ideas – and related to China. One analyst described it as a ‘rendezvous with reality.’It all began with strong words and then a telephone call to the president of Taiwan. China, it appeared, was somewhere close to Mexico in President Trump’s list of least favourite countries.
First, he backtracked over Taiwan: and has confirmed US support for China’s one nation policy. It was hailed as a breakthrough for US/Sino relations, but all that the US really did was confirm a policy, that has been in place since the time of President Nixon, is not changing.
Then there was China’s currency, the yuan or renminbi. For years, certain US politicians have blamed China’s currency policy for all their ills. President Obama was no exception, in 2008 he said that he would “insist that China stopped manipulating its currency.”
But then not much happened.
Before he was President, Mr Trump used even stronger words than Mr Obama, and if anything, the rhetoric got even stronger when he moved into the White House. He said China was the “grand champion’ of currency manipulation.
But there is a snag with the let’s blame China’s currency policy, the policy changed several years ago, and now the new US Treasury Secretary, Steven Mnuchin has seemed to acknowledge this.
To remind you, for years China tried to keep a cheap currency by taking the money saved by buying US assets. This meant that China was a major funder of US debt, but critics said its cheap currency gave Chinese exporters an unfair advantage.
The critique ignored the fact that when the US was an emerging economy in the 19th century, it pursued a very similar policy.
Whether China’s policy was the evil some say it was is a moot point, but what is clear is that the yuan is no longer cheap.
In fact, you could accuse China of manipulating its currency to keep it artificially high – it has sold over one trillion dollars in foreign exchange reserves in recent years trying to stop the currency from falling.
So, the Trump anti-Chinese vitriol is hard to justify, it is like getting cross with the Danes for the attack on Lindisfarne by Vikings.
Mr Mnuchin said: “We have a process within Treasury where we go through and look at currency manipulation across the board, and we’ll go through that process. We’ll do that as we have in the past and we’re not making any judgments until we continue that process.”
Matthew Goodman, a senior adviser for Asian economics at the Center for Strategic and International Studies, was quoted in the FT as saying that the Mnuchin comments represent "a rendezvous with reality" and "It seems they are reverting to a more traditional posture on this [currency].”
Here is an idea for President Trump and Sean Spicer, his press spokesman, instead of castigating China, why not take credit for the change in policy and with luck, no one will notice that the change occurred when the US president was called Obama.