Global Trade Tensions Escalate as Trump Criticizes Japan and China’s Currency Policies
U.S. President Donald Trump said he told the leaders of Japan and China they could not continue to reduce the value of their currencies, as doing so would be unfair to the United States.
Market Jitters
The remarks added to market jitters as Trump’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, in a fresh escalation of global trade tensions.
Nikkei Tumbles
Highlighting the risk that Japan’s export-reliant economy faces from uncertainty over Washington’s currency and tariff policies, the Nikkei benchmark tumbled nearly 2% on Tuesday as Trump’s comments drove up the yen. The yen briefly climbed to 148.60 per dollar on Tuesday, up from around 150 on Monday.
Trump’s Comments
"I’ve called President Xi, I’ve called the leaders of Japan to say you can’t continue to reduce and break down your currency," Trump said at the White House on Monday. "You can’t do it because it’s unfair to us. It’s very hard for us to make tractors, Caterpillar here, when Japan, China and other places are killing their currency, meaning driving it down."
Tokyo’s Response
Tokyo was not adopting policies directly aimed at weakening the yen, Japanese Finance Minister Katsunobu Kato said, when asked about Trump’s comments. "Japan has confirmed its basic stance on currency policy" with G7 countries and the United States, including at two-way talks with U.S. Treasury Secretary Scott Bessent on January 29, Kato told a news conference in Tokyo on Tuesday.
BOJ’s Interest Rate Hike
Trump’s criticism of a weak yen and uncertainty on how his tariff threats could affect global growth may complicate the Bank of Japan’s decision on how soon to raise interest rates. Some analysts expect Trump’s displeasure over a weak yen to work in favour of further interest rate hikes from the Bank of Japan.
Conclusion
The global trade tensions continue to escalate, and the impact of Trump’s comments on the Japanese and Chinese currencies will be closely monitored. The Bank of Japan’s decision on interest rates will be crucial in determining the direction of the yen and the global economy.