Trump Declines to Label China a Currency Manipulator as Trade War Brews

WASHINGTON — The Trump administration, which has been on the verge of a trade war with China, opted Friday not to label the country a currency manipulator, breaking a key campaign promise by President Donald Trump to punish a government he has called the “greatest currency manipulators ever.”

The Treasury Department, in its biannual currency exchange report, scolded China for its lack of progress in reducing the bilateral trade deficit with the United States, but did not find that it was improperly devaluing its currency, known as the renminbi.

“Treasury is strongly concerned by the lack of progress by China in correcting the bilateral trade imbalance and urges China to create a more level and reciprocal playing field for American workers and firms,” the report said.

It was the third time since Trump assumed the presidency that the Treasury Department opted not to accuse China of improper meddling. China has long maintained a strong grip on the value of its currency and, for years, weakened it compared with the dollar to make Chinese products cheaper to sell in the United States and other countries. More recently, China has made a big show of gradually loosening its grip, an effort meant to mollify critics like Trump and experts who have long urged Beijing to let markets fix financial problems in the world’s second-largest economy.

China had a $375 billion trade surplus in goods last year, the largest of any of the United States’ trading partners. That gap has become a frequent target of Trump’s, who has cited the trade deficit with China as a main reason for his administration’s aggressive approach, including the tariffs and investment restrictions he has threatened.

But Trump may have been persuaded not to label China a currency manipulator by business executives, who have warned the president that such a move could be disastrous for U.S. companies.

In his first months in office, Trump was surprised by the opposition to his plan to label China a currency manipulator, always a popular line on the campaign trail. In a meeting with business leaders last year, an executive of one of the United States’ largest exporters told the president that labeling China a currency manipulator could be harmful for his business, a person briefed on the discussion said.

The president responded incredulously, and was surprised when the other executives in attendance said they completely agreed, the person said.

The Treasury Department determines if a country should be labeled a currency manipulator based on bilateral trade deficits and signs that another country is depressing the value of its currency. The United States has not officially called another country a manipulator since it slapped the label on China in 1994, and doing so is supposed to kick-start negotiations to resolve the problem.

This year China, Germany, Japan, South Korea, Switzerland and India were placed on Treasury’s monitoring list for potential currency manipulation.

Corporate chiefs and investors are hoping that the U.S. and China can negotiate a settlement before the tariffs go into effect. But that looks highly uncertain. The countries are not currently engaging in formal negotiations, and the United States has not presented China with a list of actions it could take to avoid the tariff threats.

Instead, the Trump administration appears to be pushing ahead on tariffs, as well as restrictions on investment that are expected to be announced in the coming months. The U.S. trade representative is aiming to publish a list of Chinese goods as early as next week that would incur additional tariffs if Trump makes good on his most recent threat to tax an additional $100 billion in Chinese goods.

The White House has already begun imposing tariffs on Chinese steel and aluminum and has outlined another $50 billion worth of imports that would be subject to tariffs, including flat-screen TVs. The Chinese, in return, have begun imposing tariffs on U.S. pork and threatened levies on additional products, primarily agricultural.