You are here

Mnuchin says forex tariff push is not a shift to weak dollar policy


US Treasury Secretary Steven Mnuchin says currency policy can be an important tool to address trade imbalances, and that a recent proposal to tariff countries that engage in competitive devaluation doesn't represent a preference for a weak dollar.

The Trump administration last month signalled intent to turn the US$5.1 trillion-a-day global currency market into the next battlefield of his trade war with a Commerce Department plan that would allow the US to apply countervailing tariffs on nations seen to be actively driving down their currencies to boost exports.

Rebutting the view that such a regulation would signal the Trump administration's shift towards a weak dollar policy, Mr Mnuchin described it as "another important tool in the toolkit to make sure that we have fair and balanced trade". He spoke in an interview on Saturday in Fukuoka, Japan, where he's meeting counterparts from the Group of 20 gathering of the world's major economies.

Market voices on:

"Currency is now one of the issues we can look at in terms of subsidy," Mr Mnuchin said, noting that the administration acknowledges the difference between monetary and currency policy. "You can intervene and support your currency - that's not manipulation."

The preference for a more active currency stance is gaining momentum as US policymakers grapple with a wave of economic populism that brought President Donald Trump into office. His election in November 2016 highlighted an overlooked part of the electorate frustrated with trade-related job losses.

Elizabeth Warren, a Massachusetts senator, has called for "actively managing" the dollar in an effort to appeal to manufacturers, saying it would bolster US jobs and growth. The move would break from a longstanding currency agreement among the world's 20 major economies to allow markets to determine foreign-exchange rates.

A Federal Reserve gauge tracking the greenback against 26 of the largest trading partners is close to its 2002 record high. The steady strengthening of the buck has the Trump administration calling for foreign-exchange clauses as a backstop in every new trade deal it strikes. BLOOMBERG