The Trump administration recently revealed its plan to penalize countries that undervalue, inflate, and manipulate their currencies.This is the latest of many efforts to prevent foreign competitors from attempting to undermine American producers and import cheap goods into the United States.
The US Against Currency ManipulationThe proposal, released on Thursday, would let US-based companies ask for anti-subsidy tariffs on products from countries found by the U.S. Treasury Department to be engaging in competitive devaluation of their currencies. At the moment, no country in the world meets the criteria. This proposal came after a heated exchange between the U.S. and China in imposing tariffs and restrictions on each other’s goods. The yuan has lost about 8 percent of its value against the dollar over the past year as the U.S.-China trade was has taken off, offering Chinese exporters a cushion against Trump’s tariffs. President Donald Trump has long threatened to label China a currency manipulator and the administration is looking to determine whether any currency manipulation has actually taken place.
Identifying Currency ManipulatorsUnder this rule change proposed by the Commerce Department on Thursday, the United States would expand its ability to penalize countries that manipulate their currencies. The move, which could be mostly aimed at China, Germany, South Korea, and other countries, is likely to spark controversy among other nation states and could lead to more challenges with the World Trade Organization. The Commerce Department said that several methods could be used to determine which countries are currency manipulators, one of which would be based on the concept of a ‘real effective exchange rate,’ which is used by the International Monetary Fund. The issue is that categorizing a country as a currency manipulator will be a vague and often subjective decision. A lot of factors can influence exchange rates, including government purchases or central bank moves, and labeling a country a currency manipulator involves assigning intent.
Can Bitcoin Eliminate Currency Manipulation Risks?The real issue is who determines the right value. In this case, the U.S. government wants to uphold the value of the U.S. dollar. There is no agreed methodology on attributing value in an objective way since every government or central bank will always defend its own position. The real and ideal solution is Bitcoin (BTC) — a currency that has no central authority, cannot have its supply manipulated and can easily be used worldwide. When all products have a price denominated in Bitcoin, everyone can be assured that its price wasn’t manipulated via monetary or currency policies. If the Trump administration is truly concerned with minimizing the impact of currency manipulation by certain states, they should consider Bitcoin as a potential reserve currency for the U.S. and lead by example for the rest of the world. What is your opinion on this new proposal? Will this international trade war showcase Bitcoin’s potential? Let us know your thoughts in the comments below!
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