Donald Trump’s obsession with currency manipulation has reached a new high. The president’s latest tweet on the subject last week suggested the US should “match” what he called a “big currency manipulation game” played by Europe and China. Worryingly, his outburst followed recent moves by US institutions to focus more on currency manipulation. These come on top of Mr Trump’s frequent attacks on the Federal Reserve for keeping interest rates too high, and his nomination of a prominent Fed critic, Judy Shelton, to its board. Using the dollar as a weapon to boost trade will lead to further unwelcome politicisation of trade policy and risk rising retaliation.
Mr Trump’s latest accusations come just a few weeks after he took aim at European Central Bank president Mario Draghi. He tweeted that Mr Draghi was “unfairly” manipulating the euro, adding that “they have been getting away with this for years, along with China and others”.
His tweets are not, however, in isolation. In May the US commerce department issued a proposal that would see sanctions imposed on countries deemed to be manipulating their currencies. This would be done as part of countervailing duties — a process used to combat unfair subsidies by trading partners — and would involve the US Treasury providing an estimate of fair value for individual currencies.