IfW in the News

Trade War Trump Weaponizes Currency in Fight Against China

09.08.2019

Excerpt from the Article

(...) The International Monetary Fund (IMF) is also in a double bind. It regularly monitors whether countries are manipulating their currencies and thus violating the fund's rules. When it comes to China, the IMF has always said this is not the case. With his claims that China is manipulating its currency, Trump is now forcing it to take his position -- a potentially damaging step. "If the IMF supports the U.S., it will undermine its credibility," says Felbermayr. If the IMF resists, the U.S. could block important IMF committees.

"There is the danger of a currency war," says Felbemayr. But he says the IMF is being deliberately pushed off the fence by Trump. The devaluation of the renminbi, he argues, is a logical consequence of the tariffs. The economy is suffering, so the currency is dropping. "The devaluation is exactly what Trump wants: The Chinese are carrying the costs of the trade war; the U.S. is continuing to receive goods from China, but is paying less for them."

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