Lack of G7, IMF support seen dimming impact of U.S. move on China’s yuan

Munchin Trumps Lap Dog declares China a currency manipulator……. Their not! Trump got the sound bite and little else

WASHINGTON (Reuters) – China is unlikely to face serious consequences from the Trump administration’s decision to label it a currency manipulator given the apparent lack of G7 and IMF support for the move, former and current U.S. and G7 officials said. The U.S. Treasury last week put the designation on Beijing for the first time since 1994, roiling financial markets and escalating a bitter tit-for-tat tariff war between the world’s two largest economies. An accord agreed by the Group of Seven of the world’s most advanced economies in 2013 says that members should consult each other before taking major currency actions. But former and current officials said the Treasury failed to make those consultations, contradicting White House economic adviser Larry Kudlow’s claim that G7 members were on board. European countries were astonished by the lack of coordination, one senior official of a European G7 country told Reuters, asking not to be named because they were not authorized to speak to the media. The day after the announcement, German Finance Minister Olaf Scholz warned against stoking tensions at a time when trade conflicts were already hindering growth. “A further escalation will only do damage,” Scholz said in a statement, adding, “Everyone should keep a level head and tone down the rhetoric a bit.” Monday’s designation came just hours after President Donald Trump tweeted that China was manipulating its currency following a drop in the yuan below 7 to the dollar, which itself occurred a few days after Trump said he would impose a 10% tariff on an additional $300 billion worth of Chinese goods. A weaker yuan makes Chinese imports cheaper. The announcement came as a surprise to many at the White House, especially since Treasury did not classify China as a manipulator in its latest semi-annual currency report in May, a person familiar with the matter said. The International Monetary Fund has been reluctant to comment on the U.S. move. The United States is the IMF’s largest shareholder and has strong sway over who will be its new leader after Christine Lagarde resigned last month. A U.S. Treasury official said Secretary Steven Mnuchin spoke with IMF Acting Managing Director David Lipton this week by telephone about currency consultations and also about the leadership succession. The official offered no further details. On Friday, the head of the IMF’s China department, James Daniel, stood by the fund’s assessment last month in a report on currencies and trade balances that the value of China’s yuan was broadly in line with economic fundamentals. He provided no clues to the path forward on the IMF’s engagement with Treasury. Prominent economists, including former IMF chief economist Maurice Obstfeld and former Treasury Secretary Larry Summers, say there is no evidence to support the move.