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Trump's Yuan Manipulation Views Don't Tick All Treasury's Boxes

While President Donald Trump’s personal view is that China is manipulating its currency for a trade advantage, his Treasury will make an official determination next month.

The department’s semiannual report on foreign-currency practices, due around mid-April, uses three criteria to decide whether a major trading partner is manipulating its currency. As of the last report in October, no one fit that designation though China and five other economies are on a watch list, which began in 2016.

Taking an informal peek ahead to April’s assessment -- based on Treasury’s scoring system using recent Chinese and U.S. government data -- it appears China is moving a little further away from the legal definition of a currency manipulator. The numbers indicate China may still only meet one of the three conditions, the same as the October report.

Let’s look at Treasury’s criteria for currency manipulation to see where China stands.

Yes, but it’s narrowing. As America’s biggest trading partner, China is running a trade surplus well above the $20 billion threshold set out in the Treasury criteria. Nonetheless, based on Treasury’s own calculation of 12-month trailing data, the U.S. trade gap with China eased last year. As of January, the deficit dropped to $349.4 billion -- near the lowest in two years -- compared with the $356.1 billion level cited in Treasury’s last report in October.