US President Donald Trump took a swing at the Russian and Chinese regimes on Twitter on Monday, in his latest public statement on rising trade tensions.
Mr Trump said that there was a deliberate attempt by these countries to devalue their currencies at a time of rising interest rates in America, suggesting the nations were deliberately attempting to derail the US economy.
This follows the sharp devaluation of the Russian rouble in the wake of the announcement of swinging US sanctions on the country. The US move to punish Russia’s economy was a response to an escalation of violence in Syria and the poisoning of a former Russian spy in the UK.
Mr Trump said: “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!”
The deputy Russian finance minister claimed on Monday that the country and its G20 and BRICS allies with emerging economies were discussing the dominance of the US dollar as a reserve currency, according to Russian state news agency RIA.
Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!
— Donald J. Trump (@realDonaldTrump) April 16, 2018
It is unlikely that there has been a deliberate effort by these countries to devalue their own currencies in response to US foreign policy. A range of factors, including the global dominance of the dollar, rising US interest rates and planned tariffs against China and sanctions against Russia, have combined to result in devaluations.
Ben May of Oxford Economics said: “Economic theory would suggest that if you raise your interest rates that it is likely to lead to a stronger currency. But to a certain degree you can’t explain currency movements with one side of an argument. More often than not it’s going to be a combination of events.”
Mounting political tensions will have made safe haven currencies more attractive but Mr May said “Russia is clearly not a safe haven in this context”.
Mr Trump’s social media post may also be a thinly veiled critique of the head of the Federal Reserve and top interest rate setter, Jerome Powell. Mr Powell has made several remarks about the recent tax cuts in the US, saying that the US government was not on a “sustainable fiscal path”.
The tweet also comes after Japan lent its support to free trade, following highly unusual meetings between Japan’s foreign minister Taro Kono and the Chinese government’s top diplomat and foreign minister, state councillor Wang Yi.
The meetings, set up to discuss economic interests were the first of their kind for seven years and have been held less than a week before talks between Prime Minister Shinzo Abe and President Trump later this week.
Mr Kono said: “We have shared understanding that a trade war, no matter which country has brought it about, would have a very large impact on the prosperity of the international economy.”
Japan’s backing of China’s bid to raise support for free trade and the supremacy of the World Trade Organisation in settling disputes, comes amid rising concerns about the US pressure for a bilateral Japan-US trade deal.
Would only join TPP if the deal were substantially better than the deal offered to Pres. Obama. We already have BILATERAL deals with six of the eleven nations in TPP, and are working to make a deal with the biggest of those nations, Japan, who has hit us hard on trade for years!
— Donald J. Trump (@realDonaldTrump) April 13, 2018
Mr Trump has raised the possibility of rejoining the Trans Pacific Partnership, having pulled out of the planned Asia-Pacific trade pact just last year. Some believe that the move was an attempt at turning the screw on Tokyo ahead of talks this week.