Trump’s Administration Condemns Its Trading Partners Of Currency Manipulation

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Trump’s Administration Condemns Its Trading Partners Of Currency Manipulation

The administration system under Dr Donald Trump has condemned its trading partners of currency manipulation. Mr Trump has said at a meeting on Tuesday that China and Japan had used monetary policy to engage in “devaluation” to obtain a trading improvement over the US.

In contrast to the broad multilateral accords followed by the ex-US President Mr Barack Obama, Mr Trump prefers bilateral trade and has even withdrawn from a 12-country Pacific Rim deal last week that was once negotiated by the ex-president.

One of the points of friction in Brussels and Washington was Germany’s superfluous trade with the US and much of the eurozone. Berlin was considered to trigger domestic demands as an attempt to rebalance the economy. However, according to the critics, Berlin had benefitted from the weakness of the eurozone, which holds the value of euro lower than other regional currencies, allowing Germany to export at cheaper rates in overseas markets like the US and China.

Mr Trump has maintained its public support for the British Government regarding its conciliations with the EU during the times of Brexit. According to him, Germany has considered the EU as a vehicle and Nato as an obsolete alliance.

There has been growing differences and debates over the German economic policy during Mr Obama’s time but it was handled with sheer diplomacy. Mr Navarro’s comment indicated an increasing tendency of the Trump administration to upset the EU in general and German chancellor in particular. According to him, the Brexit marked the death knell of a possible US-EU deal.

Upon the splitting of the paths of the central banks of the two currency zones, the Euro has weakened against the dollar. The ECB (European Central Bank) initiated the mass bond-buying program leading to the weakening of the currency; however, the US Fed strengthened the dollar by rate hikes. To cope with this issue, the Bundesbank has called for a stop to bond buying and a push for higher rates by the lawmaker's points at a possible strengthening of the euro.

Mr Navarro has endorsed an import tax plan being supported by the Republican Leaders in the House of Representatives. The plan would put an end to the company’s abilities to subtract import costs from the revenues that are taxable while ensuring any export revenues free of taxes. It was considered last week by the White House as an attempt to pay for a wall on the Mexican border.

Exporters like General Electric have considered the move to be a “border adjustable system” since it put them on even grounds with its international competitors that were able to assert for the value added tax refunds on their export revenues. However, import-dependent businesses like the Walmart considered it to be derogatory for their business since it will result in a hike in taxes on the imports resulting in an increased consumer rates.

According to Mr Navarro, the US income tax system has been unequal and foreigners conducting export business to the US has been provided with an unfair subsidy. This will push the American jobs and companies offshore and Mr Trump has promised during his campaign to put an end to it.

Mr Navarro has declined any arguments that US consumers will end up paying for such a tax change. According to him, the US government prefers to paychecks to welfare checks and considers providing the middle-class section with rising wages.

Proponents came up with the argument that such a system might be detrimental to US export competitiveness leading to widening of the US trade deficit with other countries, which the Trump government has decided to reduce. However, Mr Navarro does not take this into consideration, shifting his worries to the actual impact of a trade-related deficit in goods on the rates of income growth and economic growth.

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