US Treasury's Mnuchin dials back Trump economic promises

The Treasury secretary has pulled back from economic pledges, downgrading the growth target and indicated there is no hurry to attack China over its currency.

US Treasury's Mnuchin dials back Trump economic promises

World Bulletin / News Desk

US Treasury Secretary Steven Mnuchin on Thursday dialed back some of President Donald Trump's economic policy pledges, including on growth and China's currency.

While he reaffirmed the promise to push through tax cuts by August, and pursue deregulation on companies and banks, Mnuchin added a dose of reality to what can be achieved.

Trump during the campaign promised economic growth of four percent and that pledge remains on the White House website, in addition to the pledge to create 25 million jobs in the next decade, goals widely regarded as unrealistic.

Trump also vowed to declare China a currency manipulator on his first day in office. He accuses the country of keeping the renminbi undervalued to gain a trade advantage, but economists say that view is out of date.

Mnuchin said tax cuts and reduced regulations, including on banks, will boost economic growth to three percent by the end of next year, and he acknowledged that even that is likely more optimistic than the official analysis of program will be.

"I think it's very achievable," Mnuchin said in an interview on CNBC. "We believe we can be competitive and get back to sustainable growth at three percent or more."

Mnuchin said the key to boosting growth would be tax cuts and "regulatory relief," including reducing the burden of Dodd-Frank banking regulations implemented in the wake of the 2008 global financial crisis.

But the impact likely will not be seen before late 2018.

"Regardless of when they go in place, this won't really impact the economy until next year when you begin to see changes in behavior. And it will take a couple years to get growth."

Mnuchin acknowledged that the administration's growth estimates likely will be higher than what Congress uses to score the tax plan.

The US economy expanded by 1.6 percent in 2016 and 2.6 percent in 2015. The International Monetary Fund last month projected growth of 1.9 percent this year and two percent in 2018, but said the outlook could change based on the tax and spending policies being discussed.

Mnuchin agreed that the very low US interest rates may have to rise as economic growth picks up, noting that the US Federal Reserve has signaled that possibility.

In fact, in the minutes of the last policy meeting, released Wednesday, central bankers indicated a rate increase will be needed soon, and the Trump administration policies being discussed may prompt more and more frequent increases in the key lending rate.

 Currency manipulator 

 Mnuchin would not commit to taking action against China, as Trump repeatedly has threatened to do.

"Currencies are one of the things we look at, and that's something I've talked to a lot of my counterparts about," he said.

"We have a process within Treasury where we go through and look at currency manipulation across the board."

Treasury produces a semi-annual report to Congress on the currency policies of trading partners, and the next one is due out in April. 

"We're not making any judgments until we continue that process," he added.

Naming China a "currency manipulator," which the last two administrations resisted doing to avoid upsetting trade relations, would set in motion a process that could allow the United States to take retaliatory trade action.

China has frequently been accused of having built a trade juggernaut by keeping its currency weak, which holds down prices of goods sold overseas and makes them more competitive.

However, in recent years Beijing has been using its substantial foreign reserves to prop up the value of the renminbi.

And as of October, China only met one of Treasury's three criteria for scrutiny of its currency: a large trade surplus with the United States. 

In its last annual review of the Chinese economy, in August 2016, the IMF said the renminbi was "broadly in line with fundamentals" of its economy. But in 2015 it had appreciated by 10 percent and was "moderately stronger" than the state of its economy would dictate, contradicting the Trump's view.

Still, Mnuchin in a conversation Tuesday, urged IMF chief Christine Lagarde to provide "frank and candid analysis of the exchange-rate policies of IMF member countries."

The IMF regularly monitors currencies and other economic policies in the 189 member countries, and its rules dictate governments must "avoid manipulating exchange rates... to gain an unfair competitive advantage over other members."

However, in practice the fund can only exert real pressure to change policies on those countries that have IMF loan programs in place.

 

Güncelleme Tarihi: 23 Şubat 2017, 20:57
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