U.S. President Donald Trump on Friday launched a fresh attack on American trading partners, saying the E.U. and China were manipulating their currencies, and he threatened to hit all imports from China with high tariffs.
The comments also signaled an undiminished appetite for battle on multiple fronts after a week dominated by coverage of the fallout from his dealings with Russian President Vladimir Putin.
The harsh comments took fresh aim at pillars of the international economic system and underscored Trump’s break with long-established norms by again openly rebuking the Federal Reserve for raising interest rates. The outbursts were another crosswind for Wall Street, which struggled to find direction and finished the day a hair’s breadth in negative territory.
In a pair of tweets, Trump said China, the European Union and others had been “manipulating their currencies and interest rates lower” while the U.S. dollar strengthened, eroding “our big competitive edge.” He said the Fed’s course of tightening monetary policy now “hurts all that we have done.”
The Fed has raised the benchmark lending rate twice this year after three increases in 2017 and two more rate hikes are expected this year as the central bank removes stimulus from the economy to keep a lid on inflation. The chance inflation might accelerate has increased after the massive tax cut Trump championed last year, which has raised the U.S. debt and budget deficit.
He again said he was willing to ramp up his attacks on China, potentially imposing punitive tariffs on all of the $505.6 billion in goods imported from that nation. “I’m ready to go to 500,” Trump said in a CNBC interview that was broadcast Friday. “We’ve been ripped off by China for a long time.”
The White House in June already threatened to extend punishing U.S. duties progressively to up to $450 billion in Chinese imports. Steep tariffs already are in place on $34 billion in Chinese goods, and a second tranche of $16 billion in products is under review and could soon be added. Washington also is now targeting another $200 billion in imports, which see fresh tariffs imposed as soon as September.
Beijing has vowed to hit back dollar-for-dollar and accused the United States of starting the “largest trade war in economic history.”
In the CNBC interview broadcast on Friday, Trump reiterated his claim that the United States is “being taken advantage of” on issues including trade policy.
The U.S.-China spat is the largest and broadest of several trade fights picked by Trump. The growing share of international trade under threat—including the tariffs on autos and auto parts now under consideration—could harm the global economy by disrupting manufacturing supply chains, raising prices and causing firms to hold off on new investments.
In the CNBC interview, Trump also said he was “not happy” the Fed planned to continue raising benchmark lending rates. “I’m not thrilled,” he said. “Because we go up and every time you go up they want to raise rates again.” He likewise also took aim at the dollar, saying a higher value “puts us at a disadvantage” and adding that the Chinese yuan “has been dropping like a rock.”
“The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals,” Trump said on Twitter.
The comments, plus Trump’s criticism of Federal Reserve interest rate hikes, had sent the dollar tumbling against a basket of currencies. After sliding recently to its lowest levels in a year in April as the Sino-U.S. trade conflict heated up, the yuan strengthened to around 6.77 by the close on Friday.
Despite Trump’s claim, the yuan has been rising steadily if gradually in recent years, as most economists and officials say Beijing actually has been intervening in currency markets to keep the currency from weakening. However, analysts said China may be willing to allow further depreciation as the trade war rumbles on.
“The [yuan’s] slide against the U.S. dollar will substantially cushion the impact on Chinese exporters from the planned next round of U.S. tariffs,” Rajiv Biswas, chief Asia economist with IHS Markit, told AFP
The U.S. dollar, meanwhile, continued its decline against the euro and pound. “Currency is now part of the trade war folks,” said Greg McKenna, chief market strategist at AxiTrader.