Stable Yuan.. Essential US Request in Trade Talks with China

By: Yassmine ElSayed

CAIRO, Feb. 20 (SEE) -  Bloomberg quoted sources revealing that US asked China to keep the value of the yuan stable as part of trade negotiations between the world’s two largest economies, a move aimed at neutralizing any effort by Beijing to devalue its currency to counter American tariffs.

Officials from the two countries are discussing how to address currency policy in a “Memorandum of Understanding” that would form the basis of a deal that ultimately will have to be approved by President Donald Trump and his Chinese counterpart Xi Jinping, according to several people involved in and briefed on the discussions.

While the precise wording remains unresolved, a pledge of yuan stability has been discussed in multiple rounds of talks in recent months and both sides have tentatively agreed it will be part of the framework of any final deal. Negotiations resume Tuesday in Washington and are scheduled to continue through Friday as a March 1 deadline for higher U.S. tariffs approaches.

China’s currency climbed to its highest level in two weeks, strengthening 0.5 percent to 6.7270 per dollar.

A key enforcement tool would be U.S. tariffs. The Trump administration has been clear in its talks with Beijing that any attempt to depreciate the yuan -- a strategy aimed at offsetting existing U.S. duties on Chinese imports -- would be met with more or higher American tariffs, according to two of the people briefed on the discussions.

“A U.S. desire for a commitment to a stable yuan to ensure Beijing doesn’t try to depreciate away the impact of higher U.S. tariffs is understandable. It’s just not practical, and could create more problems for both sides.” Chang Shu and David Qu, Bloomberg Economics said.