US President Donald Trump took a swing at the Russian and Chinese regimes on Twitter yesterday, in his latest statement on rising trade tensions.
Trump said that there was a deliberate attempt by these countries to devalue their currencies at a time of rising interest rates in America, suggesting the nations were deliberately attempting to derail the US economy.
This follows the sharp devaluation of the Russian rouble in the wake of the announcement of swingeing US sanctions. Trump said: "Russia and China are playing the Currency-Devaluation game as the US keeps raising interest rates. Not acceptable!"
The deputy Russian finance minister claimed on Monday that the country and its G20 and Brics allies were discussing the dominance of the US dollar as a reserve currency, according to Russian state news agency RIA.
It is unlikely that there has been a deliberate effort by these countries to devalue their own currencies in response to US foreign policy. A range of factors, including the global dominance of the dollar, rising US interest rates and planned tariffs against China and sanctions against Russia, have combined to result in devaluations.
Ben May of Oxford Economics said: "Economic theory would suggest that if you raise your interest rates that it is likely to lead to a stronger currency. But to a certain degree you can't explain currency movements with one side of an argument. More often than not it's going to be a combination of events."
Mounting political tensions will have made safe haven currencies more attractive, but May said, "Russia is clearly not a safe haven in this context."
Trump's social media post may also be a thinly veiled critique of Jerome Powell, the head of the Federal Reserve and top interest rate-setter, who said that the US government was not on a "sustainable fiscal path".
The tweet also comes after Japan lent its support to free trade, following highly unusual meetings between Taro Kono, Japan's foreign minister, and Wang Yi, the Chinese government's top diplomat.
The meetings were the first of their kind for seven years and have been held less than a week before talks between Prime Minister Shinzo Abe and President Trump.
Kono said: "We have shared understanding that a trade war ... would have a very large impact on the prosperity of the international economy."
Japan's backing of China's bid to raise support for free trade and the supremacy of the WTO in settling disputes comes amid rising concerns about the US pressure for a bilateral Japan-US trade deal.
Trump has raised the possibility of rejoining the Trans Pacific Partnership. Some believe that the move was an attempt at turning the screws on Tokyo ahead of talks this week.