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Trump called China a currency cheat. Then he changed his mind. Now he’s changed it again.

Trump can’t seem to make up his mind on whether China is suppressing its currency. (It’s not.)

Trump called China a currency manipulator on Twitter on Monday morning, once again reversing his position on the issue.
Trump called China a currency manipulator on Twitter on Monday morning, once again reversing his position on the issue.
Mandel Ngan/AFP/Getty Images

Donald Trump really can’t seem to make up his mind about whether China is devaluing its currency.

He complained about it back in 2013 when he was a private citizen, and on the campaign trail he continually vowed that he would put an end to the practice, saying it gave Chinese exports an unfair edge in global markets.

”On day one of a Trump administration, the US Treasury Department will designate China a currency manipulator,” he wrote in a Wall Street Journal op-ed in 2015. In his Contract With the American Voter describing his plan for his first 100 days in office, he pledged: “I will direct the Secretary of the Treasury to label China a currency manipulator.”

But just a few months into his presidency, he abruptly reversed his position, saying China was actually not manipulating its currency — a major policy reversal that calmed fears of a trade war.

Now Trump seems to have flipped yet again on the issue. On Monday morning, seemingly out of the blue, he tweeted this:

That contradicts a report released by his own Treasury Department just a few days ago, which did not identify China as a currency manipulator. In fact, the report noted that in 2017, China’s currency had risen in value, which should help reduce the US’s trade deficit with China — which is the president’s main concern when it comes to Beijing’s currency practices.

Trump’s tweet raises the question of whether he’ll begin to once again consider instructing his advisers to formally blacklist China as a currency manipulator, a move that triggers a process that could potentially result in the US government imposing new tariffs on Beijing.

The US is already in the midst of imposing tariffs on billions of dollars of Chinese imports, so that would cause an even greater escalation in tensions between the two countries.

It would also be punishing China for something it’s not actually doing.

So is China manipulating its currency or not?

Beijing’s central bank actively tries to move the value of Chinese currency, the renminbi (also called the yuan), by buying or selling foreign currencies.

That’s in contrast to many advanced economies like the US, which have a floating exchange rate, where the price of the currency is largely determined by supply and demand for it relative to other currencies (although it can be influenced by other factors as well, like a country’s macroeconomic policies).

China spent decades suppressing the renminbi’s value to keep the country’s colossal export machine competitive. It bought up tons of foreign currency, mainly dollars, in order to keep its own currency lower, accumulating $4 trillion worth of foreign exchange reserves by 2014. (When you buy a ton of currency, its value appreciates, and your own currency depreciates relative to it.)

By keeping the renminbi’s value low, China ensured that its goods remained inexpensive in global markets — and made foreign imports into China more expensive.

But as China’s growth slowed in recent years, foreign investors started pulling out of the country, and the pressure on the renminbi started going the other way. So in 2015 and 2016, Beijing changed its approach: It didn’t suppress its currency — it intervened in order to prop it up. China’s foreign reserve dropped from $4 trillion to $3 trillion during those years as the country sold off foreign currency to keep the renminbi from depreciating too swiftly.

In other words, China was actively making sure its currency wasn’t dropping, which made its products more expensive than they would be otherwise. It also made US exports more affordable to Chinese consumers.

That’s why economists were alarmed by Trump’s allegations that China was suppressing its currency on the campaign trail and during the early months of his administration. “If anything, we should be thanking the Chinese lately,” Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics, told me in February 2017 when it seemed that Trump might be on the brink of blacklisting China as a currency manipulator.

Over the course of 2017, China changed its approach once again — now it’s taking a hands-off approach. In an email on Monday, Gagnon told me that China’s handling of currency isn’t enough to count as manipulation of any kind, and that China’s central bank is “basically doing nothing.”

China is no longer doing what Trump alleges. The president has a number of things he could take up with China to make American trade with the country more competitive, like pushing for more stringent worker standards there.

But right now he appears to be, once again, trying to pick a fight over an issue that’s become obsolete.