U.S. Treasury Secretary Steven Mnuchin told International Monetary Fund Managing Director Christine Lagarde on Tuesday that he expects the IMF to

provide “frank and candid” analysis of exchange rate policies, a Treasury spokesperson said.

In a phone call with Lagarde, the spokesperson said, Mnuchin also “noted the importance that the administration places on boosting economic growth and jobs in the United States, and looked forward to robust IMF economic policy advice on its member countries and tackling global imbalances.”

The conversation on U.S. priorities occurred as officials from the Group of 20 major economies express concern about how the United States will approach multilateral institutions and delicately crafted G-20 language on foreign exchange cooperation, trade and other economic policies.

As President Donald Trump pursues an “America First” agenda aimed at reversing chronic trade deficits with China, Mexico, Germany and other major trading partners, some are concerned his administration could back away from pledges to maintain an open global trading system.

“I believe the Trump administration will try to leverage the IMF and the G-20 to help achieve its external objectives and escalate pressure on China and Germany,” said Domenico Lombardi, a former IMF board official who is now with the Center for International Governance Innovation, a Canadian think tank.

Targeting currency manipulation

Throughout his election campaign, Trump accused China of manipulating its yuan currency to gain an export advantage over the United States. And Trump trade adviser Peter Navarro in late January said Germany was using a “grossly undervalued” euro to do the same. Both countries have large bilateral trade surpluses with the United States.

But IMF officials no longer view the yuan as undervalued, especially since China’s central bank has spent hundreds of billions of dollars to prop up the yuan over the past year to counter capital outflows.

The euro’s value against the dollar is widely viewed as a function of still-weak fundamentals in key eurozone economies and the European Central Bank’s use of negative interest rates at a time when the U.S. Federal Reserve is raising rates.

A ‘constructive discussion’

Mnuchin, who was sworn in as Treasury secretary just a week ago, has yet to lay out his priorities. Before his Senate confirmation, he pledged to work through the IMF, the G-7 and G-20 to address currency manipulation as an unfair trade practice.

But he added in written remarks to senators: “The IMF and other multilateral institutions do not appear to have prevented nations from manipulating the value of their own currencies.”

In the call with Lagarde, the Treasury spokesperson said Mnuchin “underscored his expectation that the IMF provide frank and candid analysis of the exchange rate policies of IMF member countries.”

IMF spokesman Gerry Rice said that Lagarde “had a constructive discussion with Secretary Mnuchin on a wide range of issues of interest to our membership. We look forward to continuing our close and productive engagement with the U.S. authorities.”

US is largest IMF shareholder

The United States is by far the IMF’s largest shareholder, with about 17 percent of its board voting power, enough for an effective veto over many major decisions.

It is unclear how Mnuchin might wield U.S. influence over the IMF on issues such as whether it should commit resources to Europe’s bailout of Greece.

In his written remarks to senators, Mnuchin said the Trump administration will “ensure that U.S. resources placed in international institutions such as the IMF and multilateral development banks are used to promote policies consistent with the objectives of the United States to the greatest extent

possible.”
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