After identifying "concrete steps" that China has used to manipulate its currency while maintaining substantial foreign exchange reserves, the US government will engage with the International Monetary Fund to eliminate perceived unfair competition from Beijing, Treasury Secretary Steven Mnuchin (left in photo) said in a statement released late Monday.

On Monday, China let the yuan drop below 7 per $1 (8 per €1) Monday for the first time in 11 years, which gives exporters a price edge in world markets and lessens the effect of tariffs imposed by the United States. The devaluation prompted an irate Twitter outburst from Donald Trump (right in photo).

According to the US Treasury, a statement released Monday by the People's Bank of China openly acknowledged "that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis." Therefore, Mnuchin, "under the auspices of President Trump, has today determined that China is a currency manipulator."

China also pledged to stop importing US agricultural goods — inflaming a worsening trade war with the United States.

Read more: HSBC CEO quits as bank warns of looming clouds

The US's own currency fell to a two-week low of $1.12 to €1 after the Treasury Department released its statement.

The 1.4% drop in the yuan's value comes after Trump vowed to impose 10% tariffs on $300 billion of imports from China beginning September 1 — breaking a ceasefire in the trade war, which has disrupted global supply chains and slowed growth. The US Treasury Department charges that Monday's measure also violate China's G20 commitments to refrain from competitive devaluation.

The designation could pave the way for more US sanctions against China. In May, the Treasury Department declined to sanction China for manipulating its currency.

Read more: US to deploy new missiles in Asia 'sooner rather than later'

The United States last named China a currency manipulator in 1994, making it the last country to reserve the Treasury Department's designation. The department named Taiwan and South Korea manipulators in 1988 — the year that Congress enacted the currency review law.

DW's editors send out a selection of the day's news and features. Sign up to receive it here. </s> The U.S. and China just opened an explosive new front in their broadening economic confrontation: a currency war.

China allowed the value of its tightly controlled currency to fall to an 11-year low Monday, a move that threatens to hurt American producers by making their products more expensive for Chinese customers.

The Treasury Department retaliated late Monday afternoon by designating China a “currency manipulator,” a rare label it has only slapped on foreign countries a few times.

The twin actions were widely seen as a major escalation of the U.S.-China trade war. Analysts and economists said they fear severe economic consequences for both countries, as the moves are seen as likely to lead to additional trade restrictions that could slow growth.

“It could get very serious if trade tensions between China and the U.S. morph into a currency war,” said Eswar Prasad, a professor of trade policy at Cornell University. “This could lead the U.S. to essentially shut down all imports from China.”

The latest feud kicked off last week when Trump announced that he would impose 10 percent tariffs on an additional $300 billion in Chinese imports, citing a breakdown in negotiations with China’s government.

China responded Monday by allowing its currency to fall to an 11-year low, crossing the threshold of 7 yuan (or renminbi as the currency is also known) per-dollar, a level not seen since the Great Recession. The falling value of the Chinese currency rippled through the global economy, leading to steep losses on Wall Street and rattling investors.

Trump lashed out against China over the decline, accusing Beijing of “currency manipulation.” A statement by the Treasury Department said Mnucin has “today determined that China is a currency manipulator.”

“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation,’” the president said on twitter. “Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Some leading Congressional Democrats have backed the president in raising that concern, with Senate Minority Leader Charles E. Schumer (D-N.Y.) calling on the administration to label China a currency manipulator, according to Bloomberg.

The fight over China’s economy poses several risks, from exacerbating America’s trade deficit to slowing down both nation’s economies.

Widening America’s trade deficit. As a candidate and in the White House, Trump has made reducing America’s trade deficit with China -- the amount by which U.S. imports to China exceeds its exports -- a central priority of his administration.

But earlier this year, the U.S. posted an approximately $900 billion trade deficit, setting a new record. America’s trade deficit with China is projected to balloon over the next several years, said Robert Scott, an economic expert at the Economic Policy Institute, a left-leaning think-tank. The value of the dollar has already been rising since last year.

The depreciation in China’s currency means American manufacturers will have an even harder time selling their products to China and in other markets where Chinese producers compete, experts say, further widening the nation’s trade deficit.

“If China continues to devalue its currency, it will continue to make the trade deficit worse -- even if the tariffs reduce imports,” Scott said. “That will be more than offset by the competitiveness of Chinese exports and everywhere we compete.”

Severe retaliation from the U.S. The U.S. last named China a currency manipulator in the early 1990s, and has not applied that designation since. In May, a Treasury Department report identified several red flags but stopped short of designating China a currency manipulator.

Under the designation, America could impose much more significant tariffs on China than it has so far -- which could trigger further retaliation from China.

“The U.S. could use the designation as a means to impose unilateral punitive tariffs," Prasad said. "And it would certainly also provide justification and political cover for more tariffs.”

America may also appeal to the World Trade Organization for a crackdown on China, or successfully rally international allies to restrict trade with China.

“There’s a risk now they view the currency depreciation as an act of economic aggression and decides to further increase the economic hostility against China,” Prasad said.

A drop in global demand. But the most dangerous potential consequence of a currency battle would be a slowing of overall economic growth in the U.S. and China, at a time when analysts already fear a global slowdown could push the U.S. into a recession.

China’s growth has already slowed. A depreciation in the Chinese currency could hurt European manufacturers who compete with Chinese products, which could hurt those countries’ economies at a vulnerable time. Already, Wall Street saw its worst day of 2019 with a massive sell-off, while volatility indexes soared and all 11 stock market sectors Monday were in the red.

“The financial instability associated with the trade wars will increase uncertainty and hurt confidence and investment, which can have a bigger impact on the US economy,” said Mark Sobel, a former Treasury official.

The potential for higher tariffs and a devaluation of currencies has echoes of the steps that led to the Great Depression in the 1930′s, said Steven Charles Kyle, an economics professor at Cornell University.

“We don’t want to be even on the first step of this path. This is EXACTLY what happened as the Great Depression really got going in the 1930s: Everyone erected high tariff barriers and tried to out-compete their trading partners in devaluing (depreciating) their currencies,” Kyle said in an email. “A few years of that and world trade ground to a near total halt.” </s> By David Lawder, Andrea Shalal and Andrew Galbraith

WASHINGTON/SHANGHAI (Reuters) - A yearlong U.S.-China trade war boiled over on Monday as Washington accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade.

The U.S. Treasury Department announced late on Monday that it had determined for the first time since 1994 that China was manipulating its currency, knocking the U.S. dollar .DXY sharply lower and sending gold prices XAU= to a six-year high.

The designation by U.S. Treasury Secretary Steven Mnuchin starts a formal process of bilateral negotiations between the world’s two largest economies, and fulfills a promise made by U.S. President Donald Trump on his first day in office.

“As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions,” the Treasury Department said.

The IMF had no immediate comment. Last month, the global lender said China’s yuan was broadly in line with economic fundamentals, while the U.S. dollar was overvalued by 6% to 12%.

The Treasury statement, made after the stock trading session ended, sent S&P; 500 futures EScv1 down more than 1%, suggesting investors expect Wall Street to open on Tuesday with additional losses following Monday's drop of 3% on the S&P; 500 .SPX.

The U.S. action came after China let its currency weaken 1.4%, sending it past the key 7-per-dollar level for the first time in more than a decade. Beijing also halted U.S. agricultural purchases, inflaming a trade war that has roiled financial markets, disrupted supply chains and slowed global growth.

Even before the formal designation, Trump on Monday accused Beijing on Twitter of manipulating its currency.

“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” Trump tweeted.

Trump had stunned financial markets last week by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1.

In its statement, the Treasury Department said the People’s Bank of China (PBOC) on Monday made clear that Chinese authorities had ample control over the yuan exchange rate despite their rejection of any claims of manipulation.

“This is an open acknowledgement by the PBOC that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis,” the Treasury statement said.

It said China’s actions violate its commitment to refrain from competitive devaluation as part of the Group of 20 industrialized countries. Treasury said it expected China to adhere to those commitments and not target China’s exchange rate for competitive purposes.

U.S. law sets out three criteria for identifying manipulation among major trading partners: a material global current account surplus, a significant bilateral trade surplus with the United States, and persistent one-way intervention in foreign exchange markets.

After determining a country is a manipulator, the Treasury is required to demand special talks aimed at correcting an undervalued currency, with penalties such as exclusion from U.S. government procurement contracts.

A U.S. dollar banknote featuring American founding father Benjamin Franklin and a China's yuan banknote featuring late Chinese chairman Mao Zedong are seen among U.S. and Chinese flags in this illustration picture taken May 20, 2019. REUTERS/Jason Lee/Illustration

The U.S. Treasury had designated Taiwan and South Korea as currency manipulators in 1988, the year that Congress enacted the currency review law. China was the last country to get the designation, in 1994.

Mark Sobel, a former senior Treasury and IMF official, said Mnuchin was probably ordered by Trump to issue the designation.

“It’s ridiculous that they’ve declared China a currency manipulator. They don’t have any meaningful tools to do anything about it, unless they just want to pile more tariffs on,” said Sobol, who now works with the Official Monetary and Financial Institutions Forum, a London-based think tank.

PBOC DENIES COMPETITIVE DEVALUATION

Before the U.S. designation, the People’s Bank of China (PBOC) provided an early impetus for yuan bears by setting a daily rate for the currency at its weakest level in eight months, weakening a long defense that kept the yuan stronger than 7 to the dollar.

The move was made with the blessing of policymakers to factor in market concerns around the U.S.-China trade war and its effect on China’s weakening economic growth, three people with knowledge of Chinese monetary deliberations told Reuters.

Hours before the U.S. action, PBOC Governor Yi Gang, who has been a key player in U.S.-China trade negotiations, said the yuan was now at an appropriate level given China’s economic fundamentals. He said that China would not engage in a competitive devaluation and would maintain the stability and continuity of foreign exchange management policies.

The PBOC had linked the yuan’s weakness to the fallout from the trade war, but said it would not change its currency policy and that two-way fluctuations in the yuan’s value were normal.

With the escalating trade war giving Beijing fewer reasons to maintain yuan stability, some analysts said they expect the currency to continue to weaken further to as low as 7.3 to the dollar.

Slideshow (2 Images)

Graphic: CNY breaks 7/dollar - Aug 5, 2019 - tmsnrt.rs/2Ys0l5C

The flare-up in trade tensions has renewed global financial market concerns over how much China will allow the yuan to weaken to offset heavier pressure on its exporters.

Despite slowing economic growth over the past year amid the intensifying trade war, China has not seen a rush of capital flight, thanks to capital controls put in place during the last economic downturn and growing foreign inflows into Chinese stocks and bonds.

Graphic: EM FX and trade war - Aug 5, 2019 - tmsnrt.rs/2MF3hVt </s> WASHINGTON (AP) — The U.S. Treasury Department labeled China a currency manipulator Monday after Beijing pushed down the value of its yuan in a dramatic escalation of the trade conflict between the world's two biggest economies.

The decision, which came hours after President Donald Trump accused China of unfairly devaluing its currency, marks a reversal for Treasury: In May, it had declined to sanction China for manipulating its currency.

The U.S. has not put China on the currency blacklist since 1994.

The designation could pave the way for more U.S. sanctions against China.

Earlier Monday, China had allowed its currency to weaken to an 11-year low, a move that gives its exporters a price edge in world markets and eases some of the damage from U.S. tariffs on Chinese products. </s> WASHINGTON/SHANGHAI, Aug 5 (Reuters) - A yearlong U.S.-China trade war boiled over on Monday as Washington accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade.

The U.S. Treasury Department announced late on Monday that it had determined for the first time since 1994 that China was manipulating its currency, knocking the U.S. dollar sharply lower and sending gold prices to a six-year high.

"As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China's latest actions," the Treasury Department said.

The IMF had no immediate comment.

The statement, made after the stock trading session ended, sent S&P 500 futures down more than 1%, suggesting investors expect Wall Street to open on Tuesday with additional losses following Monday's drop of 3% on the S&P 500 .

The U.S. action came after China let its yuan weaken 1.4%, sending it past the key 7-per-dollar level for the first time in more than a decade. Beijing also halted U.S. agricultural purchases, inflaming a trade war that has roiled financial markets, disrupted supply chains and slowed global growth.

Even before the formal designation, Trump on Monday accused Beijing on Twitter of manipulating its currency.

"China dropped the price of their currency to an almost a historic low. It's called 'currency manipulation.' Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!" Trump tweeted.

Trump stunned financial markets last week by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1.

In its statement, the Treasury Department said the People's Bank of China (PBOC) on Monday made clear that Chinese authorities had ample control over the yuan exchange rate despite their rejection of any claims of manipulation.

"This is an open acknowledgement by the PBOC that it has extensive experience manipulating its currency and remains prepared to do so on an ongoing basis," the Treasury statement said.

It said China's actions violate its commitment to refrain from competitive devaluation as part of the Group of 20 industrialized countries. Treasury said it expected China to adhere to those commitments and not target China's exchange rate for competitive purposes.

U.S. law sets out three criteria for identifying manipulation among major trading partners: a material global current account surplus, a significant bilateral trade surplus with the United States, and persistent one-way intervention in foreign exchange markets.

After determining a country is a manipulator, the Treasury is required to demand special talks aimed at correcting an undervalued currency, with penalties such as exclusion from U.S. government procurement contracts.

The U.S. Treasury had designated Taiwan and South Korea as currency manipulators in 1988, the year that Congress enacted the currency review law. China was the last country to get the designation, in 1994.

Before the U.S. designation, the People's Bank of China (PBOC) provided an early impetus for yuan bears by setting a daily rate for the currency at its weakest level in eight months, weakening a long defense that kept the yuan stronger than 7 to the dollar.

The move was made with the blessing of policymakers to factor in market concerns around the U.S.-China trade war and its effect on China's weakening economic growth, three people with knowledge of Chinese monetary deliberations told Reuters.

Hours before the U.S. action, PBOC Governor Yi Gang, who has been a key player in U.S.-China trade negotiations, said the yuan was now at an appropriate level given China's economic fundamentals. He said that China would not engage in a competitive devaluation and would maintain the stability and continuity of foreign exchange management policies.

The PBOC had linked the yuan's weakness to the fallout from the trade war, but said it would not change its currency policy and that two-way fluctuations in the yuan's value were normal.

With the escalating trade war giving Beijing fewer reasons to maintain yuan stability, some analysts said they expect the currency to continue to weaken further to as low as 7.3 to the dollar.

The flare-up in trade tensions has renewed global financial market concerns over how much China will allow the yuan to weaken to offset heavier pressure on its exporters.

Despite slowing economic growth over the past year amid the intensifying trade war, China has not seen a rush of capital flight, thanks to capital controls put in place during the last economic downturn and growing foreign inflows into Chinese stocks and bonds. </s> Get breaking news alerts and special reports. The news and stories that matter, delivered weekday mornings.

The U.S. Treasury Department on Monday designated China as currency manipulator, a historic move that no White House had exercised since the Clinton administration.

“Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release. “As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions.”

The formal designation — the first since President Bill Clinton’s administration in 1994 — came after China on Monday allowed its currency to breach a psychological level.

“In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past,” the Treasury Department added. “The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade.”

The yuan fell to 7 against the dollar earlier in the session for the first time since 2008.

“I think many people in the private sector may not conclude it is a currency manipulator. The key rule is it’s not intervening consistently or persistently to weaken the currency and therefore the private sector, like economists and strategists may not be convinced,” said Marc Chandler, chief market strategist at Bannockburn.

“This is another step in the currency war,” he added. “This also makes trade more difficult. This is probably bipartisan. Many Republicans and Democrats think China is taking advantage of us.”

Even before the formal designation, President Donald Trump took to Twitter to voice his opinion, accusing Beijing of manipulating its currency as the trade war between the world’s largest economies intensified.

“China dropped the price of their currency to an almost a historic low,” Trump said in a tweet. “It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

That drew support from the other side of the political aisle on Monday, when Senate Minority Leader Chuck Schumer, D-N.Y., supported designating China a currency manipulator.

“China has been manipulating their currency long-before and since President Trump took office,” Schumer said in a statement. “He should finally tell his Treasury Secretary to label China a currency manipulator. That’s all he needs to do to make it happen.”

The next step is for the U.S. to make its case to the IMF, but it’s not likely to lead to formal penalties. The manipulator label is mostly symbolic and matters more as a slight to one of our biggest creditors and an escalation in the trade war.

The Treasury Department’s announcement centered around a 1988 portion of federal law that permits the U.S. Treasury Secretary to work with the IMF to “eliminate the unfair advantage” associated with currency manipulation.

“As a rhetorical matter, I think this is a very big deal. It’s something that has been in the ether for some time; I think the Chinese have been concerned about it mainly in terms of how they’re perceived by others,” said Nathan Sheets, chief economist at PGIM Fixed Income.

“Where it’s less biting is that the 1988 statute they’ve invoked that has no concrete remedies,” Sheets added. “It’s about referring them to the IMF and having consultations with them.”

The currency’s move came after Trump ratcheted up the trade war last week, slapping 10 percent tariffs on another $300 billion worth of Chinese goods, effective Sept. 1. Until Monday, the Trump administration had passed on five opportunities to label China as a currency manipulator. </s> The U.S. Treasury Department designated China as a currency manipulator on Monday afternoon, after the yuan’s value against the dollar fell below a “line in the sand” and intensified trade tensions. In a statement, the Treasury Department said Secretary Steve Mnuchin, “under the auspices of President Trump,” has determined that China is a currency manipulator. “As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions,” the Treasury department said, explaining: “In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past. The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade.” China’s currency weakened early Monday, trading at more than 7 yuan per U.S. dollar for the first time in more than a decade. The perceived willingness by China to use the yuan as a trade weapon led to a huge selloff on Wall Street, with the Dow Jones Industrial Average and S&P 500 falling almost 3%, while the tech-heavy Nasdaq Composite slid 3.5%.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news. </s> WASHINGTON (AP) — The U.S. Treasury Department labeled China a currency manipulator Monday after Beijing pushed down the value of its yuan in a dramatic escalation of the trade conflict between the world's two biggest economies.

The decision, which came hours after President Donald Trump accused China of unfairly devaluing its currency, marks a reversal for Treasury: In May, it had declined to sanction China for manipulating its currency.

The U.S. had not put China on the currency blacklist since 1994.

The designation could pave the way for more U.S. sanctions against China.

Earlier Monday, China had allowed its currency to weaken to an 11-year low, a move that gives its exporters a price edge in world markets and eases some of the damage from U.S. tariffs on Chinese products.

Trump had gone on Twitter to denounce China's move as "currency manipulation." He added, "This is a major violation which will greatly weaken China over time."

In a statement, Treasury said it would work with the International Monetary Fund "to eliminate the unfair competitive advantage created by China's latest actions."

"This is an extraordinary action of hostility against a major trading partner, with little economic basis and again driven mostly by presidential whims," said Cornell University economist Eswar Prasad, former head of the China division at the International Monetary Fund. "The timing and apparent logic for Treasury's designation of China as a currency manipulator reeks of arbitrariness and retaliation, and will inflict further damage on an already wounded relationship between China and the U.S."

China's central bank sets the exchange rate each morning and allows the yuan to fluctuate by 2% against the dollar during the day. The central bank can buy or sell currency — or order commercial banks to do so — to dampen price movements.

China's central bank blamed the yuan's drop on "trade protectionism" — an apparent reference to Trump's threat last Thursday to impose tariffs Sept. 1 on the $300 billion in Chinese imports to the United States in addition to the $250 billion he's already targeted.

For more than a year, the U.S. and China have been locked in a trade war over allegations that Beijing steals trade secrets and pressures foreign companies to hand over technology. </s> Get breaking news alerts and special reports. The news and stories that matter, delivered weekday mornings.

Experts in international trade and monetary policy are skeptical of the U.S. Treasury’s claim that China is manipulating its currency, and say the accusation only adds fuel to the simmering trade dispute that has weighed on global growth and equity markets.

“President Trump’s labelling of China as a ‘currency manipulator’ is likely to inflame and intensify already fraught relations between the two world’s largest economies,” said Nigel Green, founder and CEO of the deVere Group.

On Monday, the Chinese yuan, also called the renminbi, crossed the symbolically significant exchange rate of seven to the U.S. dollar. In a statement issued Monday, Treasury Secretary Steven Mnuchin accused China of trying “to gain unfair competitive advantage in international trade.”

The declaration could be a pretext for additional sanctions against Chinese goods and businesses. "In practical terms, the actions this week can be expected to pave the way for more sanctions to be imposed on China from the U.S.,” Green said.

Trump has accused China of manipulating its currency since he was on the campaign trail. He promised to make such a declaration on “day one” after his election, but had not done so.

As such, some experts saw a political motive for Monday’s pronouncement.

“They get to satisfy the President,” said Nicholas Lardy, a senior fellow at Peterson Institute for International Economics.

“There are technical requirements to be called a currency manipulator under the law… and it does not appear that China has met those requirements,” said Craig Allen, president of the U.S.-China Business Council. “There’s no magical formula to say what is an overvalued or undervalued currency.”

Mnuchin said the U.S. would engage with the International Monetary Fund “to eliminate the unfair competitive advantage created by China’s latest actions,” but there is no indication that the organization would side with its conclusions.

“It could well be that the I.M.F. will come to a different conclusion than the Treasury and Trump,” Lardy said.

Contrary to Treasury Department’s assertion that China has been actively driving down the value of its currency, the reverse has been taking place, Allen said. Beijing has been propping up the value of the yuan as the trade war and other factors have taken a toll on its economy.

“The Chinese government has been active in supporting the renminbi, not devaluing it,” Allen said.

But by allowing that support to be removed and letting the renminbi drop, China showed its cards—that it's within its power to influence the currency's strength or weakness.

There are a number of supportive measures available to Chinese policymakers, including setting the starting rate for daily trading of the yuan, selling yuan-denominated financial instruments and tightening capital controls to prevent market flight. Experts theorized that Beijing temporarily might have backed off those supportive measures, causing the yuan to fall against the dollar. On Tuesday, its value rose incrementally, edging back above seven.

If China did influence value of its currency, it was more likely motivated by ongoing protests in Hong Kong than trade tensions with the U.S., said Jamie Cox, managing partner at Harris Financial Group.

“If this spills over into mainland China, it would definitely make their economy suffer,” he said. “It’s bigger than the trade situation. They’re concerned about their economy at large.”

And if the Trump administration’s declaration was a gambit to bait China into more drastic measures, the move backfired, Cox said.

“The Chinese basically didn’t bite. The President came back and labeled them a currency manipulator. A logical conclusion would’ve been for them to devalue more, but that’s not what they did,” he said.

Being able to paint Trump as the bully gives China a moral high ground that hurts America’s standing on the world stage, Lardy said. The combination of the currency accusation and the imposition of tariffs — following a promise not to at the G20 Summit — gives them plenty of ammunition, Lardy said. “Trump has taken a preemptive action in violation of his previous pledge to Xi.”

This gives the Chinese trade delegation less motivation to reach an accord, despite the economic costs. “Their incentive to carry out any negotiations is seriously undermined,” he said.

But by allowing that support to be removed and letting the renminbi drop, China showed its cards that it's within its power to influence the currency's strength or weakness.
China lets its currency drop to its lowest reported level since 2008 and also asks its state-owned companies to halt imports of U.S. agricultural products. In response the U.S. Treasury Department designates China as a currency manipulator.