It barely feels like news at this point when Donald Trump tweets nonsense about the economy. And yet I found myself fixated on this outburst about foreign exchange markets this morning:
It’s not clear what “game” Trump is talking about. Just last week, Trump’s Treasury Department chose not to label China a currency manipulator, noting that the yuan has actually risen in value against the dollar recently. (It’s up to about 9 percent year over year.) Some believe the Chinese have let that happen specifically to appease Trump and avoid being accused of gaming currency markets. Russia’s ruble, meanwhile, has in fact depreciated against the dollar. But as Bloomberg points out, much of that drop took place last week in response to the new sanctions Washington rolled out against Russian companies and businesspeople as retaliation for the country’s interference in the 2016 election, among other issues. Outside geopolitics, Moscow isn’t manipulating much of anything.
It may be best to interpret Trump’s tweet as an expression of general displeasure with China and Russia, which he’s choosing to channel into the currency issue, and leave it at that. But here’s what I find a little worrisome. It wouldn’t be surprising if the dollar did appreciate against other currencies in the coming year because, as the president says, the Federal Reserve is in the process of hiking interest rates. All else being equal, that tends to push up the value of the greenback. If Trump sees the dollar rise over the coming months and decides countries must be playing “games” in order to keep their exports cheap, that could amp up his desire to wage a trade war against the rest of the world.
Will that mean anything for American trade policy? Who knows. Because his substantive understanding of most issues is so thin, Trump is relatively ineffective at wielding his presidential powers and tends to get outmaneuvered by his own advisers, even on issues like foreign policy. When it comes to trade, the administration has fallen into a pattern of making splashy, aggressive announcements about tariffs before watering them down when it comes time for implementation, no doubt because some of the people around Trump do not actually want a trade war. It’s not even clear the White House’s recent steps toward a tariff tit for tat with China will lead to anything more than some relatively minor negotiations. The fact that Trump is wailing about the yuan just days after the Treasury cleared Beijing on the currency issue could be a sign of just how limited the president’s influence over his own administration may be.
Still, in theory, Trump does have more or less free rein over trade policy—if he wants to start slamming down tariffs left and right, our laws are set up so that he can. That’s why his delusions about issues like exchange rates matter. Trump might be ineffective at translating his rage into policy. But the more convinced our president is that the country is getting played, the more likely he is to at least attempt something rash.