The US Treasury on Monday designated China as a currency manipulator, a historic move that no White House had exercised since the Clinton administration.
"Secretary Mnuchin, under the direction of President Trump, has today decided that China is a Currency Manipulator," the Ministry of Finance said in a release. "As a result of this decision, Secretary Mnuchin will join the International Monetary Fund to eliminate the unfair competitive advantage created by China's recent actions."
The formal designation – the first since President Bill Clinton's administration in 1
"In recent days, China has taken concrete steps to devalue the currency while maintaining significant foreign exchange reserves despite active use of such tools in the past," the Treasury Department added. "The context of these actions and the improbability of China's reason for market stability confirm that the purpose of China's currency devaluation is to achieve unfair competitive advantage in international trade."
The yuan fell to 7 against the dollar earlier in the session for the first time since 2008.
" I think many in the private sector may not conclude that it is a currency manipulator. The key rule is that it does not consistently or permanently intervene to weaken the currency, and therefore the private sector, such as economists and strategists, cannot convince, "said Marc Chandler, chief strategist for Bannockburn.
"This is another step in the currency war," he added. “This also makes trading more difficult. This is probably bi-partisan. Many Republicans and Democrats believe China is taking advantage of us. ”
Even before the formal designation, President Donald Trump took to Twitter to speak out and accused Beijing of manipulating its currency as the trade war between the world's largest economies intensified.
"China dropped the price of their currency to a near historic low," Trump said in a tweet. "It's called" currency manipulation. "Are you listening to the Federal Reserve? This is a major breach that will weaken China over time!"
Currency move came after President Donald Trump abruptly sparked the trade war last week, beating 10 percent tariffs on another $ 300 billion worth of Chinese goods on September 1. Until Monday, the Trump administration had given five opportunities to label China as a currency manipulator.
"As a rhetorical case, I think this is a very big deal . There is something that has been in the ether for some time; I think the Chinese have been mainly concerned with how they are perceived by others, says Nathan Sheets, chief economist at PGIM Fixed Income.
"Where it is less biting is that the 1998 statute they invoked does not have any concrete remedies," Sheets added. "It's about referring them to the IMF and having consultations with them."
Yun Li, CNBC and Patti Domm, CNBC contributed.