FX.co ★ US to arrange trade truce with China

Washington’s recent actions have shown its willingness to arrange a truce with Beijing in a large-scale trade war between the world's top economies. So far, it is hard to explain the intentions of the US government. They can be interpreted as another strategic move to catch China completely off guard or the US administration may actually be determined to declare a truce.

The recent decision of US Treasury Secretary Janet Yellen can be regarded as the first step forward. She refrained from labeling China as a currency manipulator, whereas the previous authorities did it multiple times. Moreover, Yellen intends to review Donald Trump’s initiative that lowered thresholds for possible currency manipulators.

There are three main criteria the US applies to designate a currency manipulator. Firstly, a country’s current account surplus (the section of the account balance that measures a country's imports and exports of goods and services) should be no less than 2% of GDP. Secondly, a bilateral trade surplus with the US must be at least $20 billion. Thirdly, a central bank should spend no less than 2% of GDP on currency interventions.