Yale Economist Says Currency Manipulator Label an ‘Empty Threat’

Yale economist Stephen Roach said Tuesday the United States labeling China a currency manipulator is merely an “empty threat” that Beijing is unlikely to respond to.

The formal designation followed only a day after China let the yuan break to its lowest level against the dollar in more than a decade, – to 7 against the dollar.

“I don’t think Beijing is going to really respond to this name-and-shame approach by the Trump administration … I think this in and of itself is an empty threat,” Roach, a senior fellow at Yale University, told CNBC’s “Squawk Box.” “But if the U.S. does escalate further on the tariff front, or try other sanctions, then as we saw overnight, there will once again be intensification of pressure coming back from the Chinese.”

Roach added that Beijing has a number of options it can look into, clearly demonstrated by the latest move coming from the nation.

The U.S. and China have been embroiled in an intensifying trade war for over a year, with no resolution in sight, shaking markets and hurting global economic growth outlook.

The Treasury Department said Monday that Secretary Steven Mnuchin will engage with the International Monetary Fund (IMF) to eliminate what the U.S. has deemed an “unfair competitive advantage” created by China.

According to Roach, politics have heavily affected “objective analysis in the Trump administration.” He voiced confidence that the IMF will demonstrate greater objectivity and be more analytical in “assessing this characterization than the politicized U.S. Treasury has been.”

Strategists have noted that the U.S. has likewise considered the possibility of intervening in the currency market to bring down the U.S. dollar, a move Roach believes would be ineffective unless there is a “grand coalition of other countries that would join with the U.S. in attempting to push the (Chinese currency) back up.”

But he stressed that currently there is “no pressure elsewhere in the world that would lead to the creation of this coalition.”

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