Despite Trump’s Claims, There’s No Currency War Against the U.S.
Europe has good reasons to consider a rate cut, and China is trying to slow the yuan’s decline.
It’s usually not hard to tell when a war has started: One nation crosses another’s border with soldiers, tanks, and planes. Currency wars are tougher to call, partly because there isn’t even a clear definition of what they are. Keep that in mind when evaluating President Trump’s accusations against central banks in Europe and Asia, such as this June 18 tweet: “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”
Trump is right on two scores. The euro really did decline against the dollar, to $1.12 from $1.16 a year ago, after Draghi, the outgoing president of the European Central Bank, said “additional stimulus will be required” if the economic outlook for the 19-country euro zone doesn’t improve. Trump is also correct that a cheaper currency would likely boost the region’s economy by making exports from the euro zone cheaper abroad, and by making imports from the U.S. and elsewhere more expensive.