Northwest Arkansas Democrat-Gazette
U.S. to China: Keep yuan stable
Request part of talks to avert tariff increase, sources say
The U.S. is asking China to keep the value of the yuan stable as part of trade negotiations between the world’s two largest economies, a move aimed at neutralizing any effort by Beijing to devalue its currency to counter American tariffs, people familiar with the ongoing talks said.
Officials from the two countries are discussing how to address currency policy in a “memorandum of understanding” that would form the basis of a deal that ultimately will have to be approved by President Donald Trump and Chinese counterpart Xi Jinping, according to several people involved in and briefed on the discussions.
While the precise wording remains unresolved, a pledge of yuan stability has been discussed in multiple rounds of talks in recent months, and both sides have tentatively agreed that it will be part of the framework of any final deal. Negotiations resumed Tuesday in Washington and are scheduled to continue through Friday as a March 1 deadline for higher U.S. tariffs approaches.
Without an agreement by the deadline, a 10 percent tariff increase imposed on $200 billion of Chinese goods is to rise to 25 percent. Trump said last week that he might be willing to push back the date if the talks go well.
Beijing hopes for “a mutually beneficial and win-win agreement that is acceptable to both sides,” said a Foreign Ministry spokesman, Geng Shuang.
The White House said meetings between midlevel delegations will begin in Washington after talks last week in Beijing that U.S. Trade Representative Robert Lighthizer said “made headway” on key issues.
On Thursday, Lighthizer will lead higher level talks, joined by Treasury Secretary Steven Mnuchin, Secretary of Commerce Wilbur Ross, White House economic adviser Larry Kudlow and trade adviser Peter Navarro.
Leading the Chinese team will be Vice Premier Liu He, according to the Xinhua news agency.
A spokesman for the U.S. Trade Representative’s office didn’t immediately respond to a request for comment Monday.
The Bloomberg Dollar Index fell to 0.3 percent to a session low after the report, and the offshore yuan rose to an intraday high of 6.75 per dollar. The Australian dollar — whose economy is closely linked to China’s — climbed 0.6 percent against the greenback.
A key enforcement tool would be U.S. tariffs. The Trump administration has been clear in its talks with Beijing that any attempt to depreciate the yuan — a strategy aimed at offsetting existing U.S. duties on Chinese imports — would be met with more or higher American tariffs, according to two of the people briefed on the discussions.
Trump imposed the tariffs over complaints that Beijing steals or pressures foreign companies to hand over technology. The talks also include complaints about Beijing’s plans for government-led technology development, cyberspying and China’s trade surplus.
Beijing retaliated with higher duties on U.S. goods and told its importers to find other suppliers. That led to a 40 percent drop in Chinese imports of American goods in January.
The bilateral standoff saw the yuan fall more than 5 percent in 2018, raising speculation that China was deliberately weakening its currency to offset the impact of tariffs. The yuan has rebounded nearly 2 percent year-to-date, after sliding to a decade low against the dollar in late October.
A U.S. request for Beijing to keep the yuan from depreciating is also potentially difficult to square with Trump and past U.S. administrations’ calls for China to adopt more marketdriven changes and complaints that Beijing manipulates its currency to gain a trade advantage.
China’s foreign-exchange intervention has long been a political target in the U.S. and Trump vowed to declare China a currency manipulator during his 2016 campaign. Mnuchin hasn’t found grounds to do so but has continued to monitor the yuan closely.
The U.S. has also increasingly insisted on currency provisions in trade agreements. The renegotiated North American Free Trade Agreement now awaiting approval from Congress requires the U.S., Canada and Mexico not to engage in currency devaluations for competitive advantage. The Obama administration persuaded Japan and other counties to make a similar pledge as part of its negotiations for the Trans-Pacific Partnership.
A yuan deal with China is likely to be important for Trump’s domestic politics, too. Senate Minority Leader Charles Schumer has been a longstanding advocate of using trade sanctions to respond to alleged Chinese currency manipulation.
The China Association of Automobile Manufacturers reported Monday that China’s auto sales fell for an eighth month in January, extending a painful decline for the biggest global market as demand cooled amid a slowing economy and the trade standoff.
Purchases of sedans, SUVs and minivans fell 15 percent from a year earlier to just over 2 million vehicles, the association said.
Cooling growth and trade tensions with Washington are prompting jittery buyers to put off purchases.
January’s total vehicle sales, including trucks and buses, declined 15.8 percent to 2.4 million, according to the association.