U.S. Markets

Donald Trump says he would tax Chinese goods to stop currency devaluation

WASHINGTON (Reuters) - U.S. Republican presidential hopeful Donald Trump called for higher tariffs on Chinese goods if China does not stop allowing its yuan currency to devalue.

Republican U.S. presidential candidate businessman Donald Trump calls out to the audience at the conclusion of the Fox Business Network Republican presidential candidates debate in North Charleston, South Carolina January 14, 2016. REUTERS/Chris Keane

Trump reiterated a call he has made for a 45 percent tariff to offset devaluation.

The billionaire businessman also criticized Japan, saying it was engaging in similar practices and pointed to competition between tractors made by U.S. company Caterpillar Inc CAT.N and those made by Japan's Komatsu Ltd 6301.T.

“They’re devaluing their currency, and they’re killing our companies,” Trump said. “We are letting them get away with it, and we can’t let them get away with it.”

The yuan posted modest gains on Friday, but it was still around 1.4 percent weaker against the dollar than it started the year and has lost nearly 5 percent since August.

The question of how best to respond to China’s currency devaluation become a topic of discussion between the Republican presidential hopefuls in Thursday night’s debate.

Former Florida Governor Jeb Bush criticized Trump for calling for higher tariffs, saying that would only prompt retaliation against U.S. goods.

“This would be devastating for our economy,” Bush said in response. “We need someone with a steady hand being president of the United States.”

U.S. Senator Marco Rubio of Florida said he opposes tariffs on Chinese goods because it would only increase prices for American consumers.

“China doesn’t pay the tariff, the buyer pays the tariff. If you send a tie or a shirt made in China into the United States, and an American goes to buy it at the store and there’s a tariff on it, it gets passed on in the price to the consumer,” Rubio said.

Trump responded that Rubio’s approach - to simply build the American economy in response - would take too long.

“You absolutely have to get involved with China. They are taking so much of what we have in terms of jobs, in terms of money,” Trump said. “We just can’t do it any longer.”

U.S. Senator Ted Cruz of Texas agreed that a tariff would not solve the trade problem with China.

“If we just impose a tariff, they’ll put reciprocal tariffs, which will hurt Iowa farmers and South Carolina producers and 20 percent of the American jobs that depend on exports,” Cruz said, referring to two of the early voting states in the presidential nominating contest.

Asked about Trump’s remarks, Chinese Foreign Ministry spokesman Hong Lei told a regular press briefing that China adjusted its currency based on market needs and that it would maintain the yuan exchange rate at a “reasonable equilibrium level”.

“We are opposed to competitive devaluation of the currency, as well as currency wars,” Hong said.

Reporting by Ginger Gibson; Additional reporting by Sui-Lee Wee in BEIJING; Editing by Jonathan Oatis and Nick Macfie