Will Trump Fight the US Treasury Over Currency Manipulation Claims?

Donald Trump’s position on the currency manipulation provisions in US trade deals could lead him into direct conflict with US Treasury once he assumes the presidency, according Dick Cunningham, a senior international trade partner at Steptoe & Johnson’s Washington office.

Speaking on a webinar examining some of the implications of this week’s US presidential election, Cunningham noted that Trump has vowed to kill the proposed Transatlantic Trade and Investment Partnership (TTIP). 

One reason why Trump has criticised the TTIP in the past, said Cunningham, was because although it contains a currency manipulation provision, the provision is not enforceable. 

However, Cunningham added that the “Treasury department doesn’t like currency manipulation treated as a trade issue”, warning that Trump will “run into huge opposition” from the Treasury if he does exactly this. 

He also specifically highlighted how Trump and the Treasury department could be at odds regarding trade with China in this regard.

“The biggest single focus in everything under trade in this administration is going to be China. [Trump] wants the Treasury to name China as a [currency] manipulator, but the Treasury believes that’s fighting the last war. China is in fact, manipulating its currency, but it’s manipulating it up these days instead of down and it’s favourable to our balance of payments when they do that, but that’s what [Trump] wants to do,” said Cunningham.

Looking at how a Trump presidency could impact financial services, Matthew Kulkin, a partner at Steptoe & Johnson, commented that one of the big changes to look out for will be in the Senate Committee for Banking, Housing and Urban Affairs.

He pointed out that Senator Richard Shelby is reaching the end of his two-term limit as chairman of the committee and that the expectation is that Senator Mike Crapo will be the one to replace him in the next administration.

Kulkin said that while the expectation is that Crapo will work closely with Senator Sherrod Brown, the ranking member Democrat on the Committee, “we’re also going to watch how Senator Elizabeth Warren and the other Democrats on the Banking Committee use their minority role to, quite frankly, make things difficult for the Republican Federal Government to push forward their agenda”.

John Collins, another partner at Steptoe & Johnson, then addressed the question of which issues the Banking Committee and the House Financial Services Committee will focus on first after Trump ran such a partisan and populist campaign.

“There are two basic principles to remember: there’s likely to be financial regulation changes, which are not only a political issue, but perhaps a natural reaction after the avalanche of new regulations over the past several years. And two, and as important as the first is, Donald Trump now names the regulators,” said Collins.

He continued by stating that the “Wells Fargo effect” and the populist calls for regulating bank culture and improving customer protection might have a dampening effect on any regulatory relief for larger institutions under the Trump administration.

Despite this, Collins pointed out that both Trump and congressional Republicans have called for the repeal of Dodd-Frank and broad regulatory relief for financial institutions.

Currently, the principal legislative proposal that would achieve this is the Choice Act, put forward by Congressman Jeb Hensarling, who is also Chairman of the Financial Services Committee.

The Choice Act would undo, but not eliminate the Dodd-Frank Act, according to Collins. He said that it would repeal the Dodd-Frank Act’s orderly liquidation process, exempt institutions with leverage capital ratios of 10% or more from many Dodd-Frank requirements, limit the authority of the Financial Services Oversight Council (FSOC), repeal the Volcker Rule, set a board structure for the Consumer Financial Protection Agency and repeal the Department of Labor’s fiduciary rule.

“Mr Hensarling may be able to move the bill through the House, but the question here is what Senate and House democrats will do. The bottom line is, to get legislation this year, you have House Republicans that can move a bill, but Senate Democrats can block it. So there has to be consensus amongst Senate Democrats and House Republicans,” said Collins.

Galen Stops

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