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- The US has officially designated China as a currency manipulator.This decision was taken after China’s central bank allowed the yuan to weaken in retaliation for new US tariffs.
- A weaker yuan makes Chinese exports more competitive or cheaper to buy with foreign currencies.
- The US Treasury department defines currency manipulation as when countries deliberately influence the exchange rate between their currency and the US dollar to gain unfair competitive advantage in international trade.
- The US has said that it will now engage with the International Monetary Fund (IMF) to eliminate the unfair competitive advantage created by China’s latest actions.
- It’s the first time that the US has labeled a country a manipulator since the 1990s when China was also the target.Officially,the designation requires the US government to seek negotiations with the government accused of manipulation.
- However,the US and China have been locked in a trade war since 2018 that has spilled into areas such as technology and now currency.
