Donald Trump is taking a leaf out of Running for President 101: When the going gets tough, bash China.
In an op-ed in The Wall Street Journal Tuesday, Trump accused China of wantonly manipulating its currency and “robbing Americans of billions of dollars of capital and millions of jobs.” The Republican candidate pledged to designate China as a currency manipulator on his first day in office. He also suggested allowing offshore personal capital to be repatriated with a 10% tax, and corporate capital at a 15% tax rate. The current corporate tax rate is generally 35%.
Trump joins the tumble of Republican candidates who have dragged China through the mud during their primary campaigns. When Marco Rubio had a turn at an op-ed in the Journal in August, he suggested downgrading President Xi Jinping’s September state visit to a “working visit,” and not “treat him to a state dinner.” Scott Walker, who backed out of the race in September, went even further, proposing that instead of taking Chinese state leaders to the White House, President Obama should take them “to the woodshed.”
Observers have argued that by preventing the yuan from rising, China has been able to tip the trade balance in its direction. Cheapening the yuan against other currencies gives a boost to Chinese exporters because it means China’s goods remain cheap to foreign buyers. In a free market, the yuan would appreciate because of the strong global demand for Chinese goods, these critics say.
However, international leaders disagree over whether China’s currency is undervalued. In the latest U.S. Treasury report, the Obama administration said that the yuan “remains below its appropriate medium-term valuation.” But while the report said the yuan was undervalued, it did not accuse China of currency manipulation. It’s not clear how much of the yuan’s depreciation has been due to monetary policy versus, say, capital outflows on account of China’s slowing growth. In May, according to The Wall Street Journal, the International Monetary Fund said that the yuan was no longer undervalued—a position the group stood by even after China’s Central Bank devalued its currency in August.
China-bashing is a tried-and-true political play. Even President Obama accused China of currency manipulation during his campaign against former president George W. Bush. He hasn’t repeated the criticism during his presidency, however.
If the United States were to accuse China of manipulating its currency, the statement would trigger a series of negotiations, then, barring a solution, the United States could move ahead and pursue economic sanctions. It’s more bark than bite, since the trade disagreement would have to be worked out through the World Trade Organization, according to Foreign Policy.