The US is threatening to label Taiwan a currency manipulator on the grounds that they are intentionally devaluing their currency, which is worsening the US trade deficit from the US perspective.
The accusation doesn’t make sense anyway, given that the Taiwan dollar reached a “23-year high against the U.S. dollar” back in Jan. But if the US is worried about an “undervalued” Taiwanese currency (TWD), why would they make threats that put downward pressure on the TWD against the USD, which would only make it more “undervalued”?
Answer, because that’s the intention, at least in the short-medium term, especially given that on 24 Feb Biden issued an ‘Executive Order on America’s Supply Chains‘ to address the shortage in semi-conductors, of which Taiwan is the major supplier. You’ll notice that the price of graphics cards (GPUs) have increased by maybe 30% since Dec last year, largely due to the growing demand for Crypto currency mining rigs (see VoskCoin on Youtube).
Over the past year, the TWD has depreciated against the USD, which is bad for the US current account deficit, but good for keeping USD inflation under control, then in early March the TWD started appreciating. Around a month later (3 days ago), the US threatened to label Taiwan a currency manipulator, then the TWD started depreciating, which again will put downward pressure on US inflation.
According to the Financial Times: “Taiwan’s dollar has fallen sharply on growing expectations the US will brand the Asian country a currency manipulator”.
What game is the US playing here? Clearly the US is caught between two problems, a) dollar inflation and b) the current account deficit. If they address one, they exacerbate the other.
One part of the US strategy is to sabotage China-Taiwan trade relations, especially given that an increasing share of Taiwanese semiconductor exports have been going to China. That’s why in May last year Trump leaned on Taiwan, demanding that because they use US tech, they would need to seek permission from the US before manufacturing for Huawei.
Taiwan still makes chips cheaper than China, although that gap is rapidly closing. In say five years the two Chinas won’t need any outside tech, which terrifies the US because then they’ll lose all leverage over the supplies they need.
The US gets 80% of its rare earth minerals from China, 95% of the world’s Gallium comes from China, and China produces 60% of the world’s graphite. That’s why Australia (which has the sixth-largest reserves of rare-earth minerals), is pitching itself as an alternate source of raw minerals for making chips, but obviously our ‘convict-mentality’ ruling class is too incompetent to manufacture here.
I believe the REAL fear that the US ruling class has is not that China and Taiwan are manipulating their currencies *downwards*, rather that their currencies will *appreciate* against the US dollar, resulting in “increasing supply prices” for the US (see Utsa & Prabhat Patnaik), however, the US cannot say this because it will cause the markets to panic in ways that drive up dollar commodity prices.