The Treasury Department on Monday dropped China from a list of nations it alleges manipulate currency to gain an unfair trade advantage.
The move reverses Treasury’s decision in August to add China to the list. It also comes two days before President Donald Trump is scheduled to sign a partial trade deal with China in a White House ceremony.
The president has long accused China of depressing the yuan’s value to make its products more affordable for foreign customers, thus contributing to the trade imbalance with the U.S.
As a presidential candidate, Trump promised to brand China as a manipulator on his first day in office. Instead, Treasury Secretary Steven Mnuchin opted not to designate China in 2017 or 2018, since Beijing’s behavior did not meet specific criteria detailed in a 2015 law.
In August, Mnuchin added China to the list in response to pressure from the president. The Treasury chief did so even though many economists said the label was incorrect.
At the time, China was not intervening in currency markets the way it had in the years after it joined the World Trade Organization in 2001. China’s once-sizable global trade surplus is roughly one-tenth its 2007 size.
With the U.S. and China calling a truce in their two-year-long trade conflict, Treasury’s about-face this week is not seen as a surprise. Labeling a country a “currency manipulator” is a mostly symbolic step that requires Treasury officials to launch consultations with the offending nation. The consultations could ultimately lead to the imposition of economic sanctions such as higher tariffs on Chinese goods, something the Trump administration was already doing in its tit-for-tat trade war with China.
The partial pact that the two sides will sign is intended to prevent China from manipulating its currency to gain trade advantages.
Also, the Treasury Department does name China as one of 10 countries it says require placement on a watch list that will mean their currency practices will be closely monitored.
This report includes material from the AP.