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The U.S. Treasury Department is closely monitoring China's currency markets for signs of manipulation. By devaluing their currency, China can make its exports cheaper to buy and counteract the Trump administration's new tariffs. Despite these fears, China has largely backed away from the currency manipulation strategy in recent years to avoid inflation issues and over-reliance on credit.
But Beijing is playing a dangerous game: China risks a repeat of the 2015 and 2016 devaluation panics, in which a weaker currency resulted in destabilizing capital outflows as money poured into Canadian real estate and other havens. If, in fact, China's leaders are actively trying to weaken their currency. That would further clobber China's stock market (already in a bear market, down more than 20 percent), weaken credit markets, and threaten its real estate bubble. No surprise, then, that China's central bank has stepped up efforts to pump cash into Chinese state-owned banks in recent weeks with a clear mandate: Push the money into the economy. Trump's actions, according to Goldman Sachs, are following the script of prior trade disputes that were often settled with a "negotiated" weakness in the U.S. dollar.
https://www.cbsnews.com/news/trump-china-eu-currency-manipulators-tariff-trade-wars-hit-us-dollar/
