If a country artificially manipulates the exchange rate to make it look relatively low and the export price looks cheap, it can enhance the industrial competitiveness, increase the employment rate and increase the overall foreign exchange income of the country.
According to 1998 "Exchange Rate and International Economic Policy Coordination Act", the US Treasury Department has the right to identify "exchange rate manipulator", and this definition needs to meet three conditions at the same time:
1, the trade surplus with the United States should exceed $20 billion;
2. The ratio of current account surplus to GDP exceeds 3%;
3. The total amount of foreign assets purchased exceeds 2% of GDP.
But China only meets the first rule.
If, once a country is identified as a currency manipulator:
1. Restrict the country's overseas financing.
2, from the United States government procurement list.
3. Adopt higher IMF supervision standards.
4. Punitive tariffs
The US Treasury Department will submit a report to the meeting every six months to assess whether its major trading partners have currency manipulation.