Trump: US monetary policy must match manipulated China and Europe currencies

United States of America president, Donald Trump accused China and Europe of deliberately weakening their currencies to stimulate their economies to gain competitive advantage over the U.S. on Wednesday.

Trump’s latest Twitter outburst came as the Commerce Department reported that the US trade deficit surged to a five-month high in May, raising fears that Washington will carry out repeated threats to impose tariffs on goods from the European Union.

The US Treasury, however, again reported in May that China was not manipulating its currency and departing European Central Bank Chief Mario Draghi last month rejected similar accusations from Trump, saying the ECB does not target the exchange rate.

“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA,” Trump said on Twitter.

Trump also implied that the Federal Reserve should likewise ease monetary policy, something he has called for in the past.

He then called for easier monetary policies, adding the U.S should “match” the monetary policies of China and Europe.

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Analysts said a weaker euro would nudge Trump to carrying out the previous to increase tariffs on European goods. A weaker currency results to cheaper goods, giving the exporters competitive advantage they added.

“Our biggest concern here is that Trump will be minded to impose ‘countervailing tariffs’ on the European auto sector in coming months, justified on the premise that the Commerce Department has recently granted itself the power to do just this is response to what it deems to be countries that keep their currencies artificially depressed,” said Ray Attrill, head of foreign exchange strategy at the National Australia Bank.

Trump has accused China of manipulating its yuan for a long time. Amid trade war, he repetitively accused China of currency manipulation to make their export more attractive.

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Sean Callow, Westpac Bank’s senior currency strategist told CNBC on Thursday, referring to Trump’s tweet said: “I don’t know why he’s complaining about China right now. Certainly, for anyone who actually follows the Chinese currency, it’s clear that China has not been trying to weaken its currency for the past couple of years”.

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