The U.S. Treasury Department labeled China a currency manipulator.
This came after Beijing pushed down the value of its yuan in a dramatic escalation of the trade conflict.
The conflict mentioned to be in between the world’s two biggest economies.
The decision, which came hours after President Donald Trump accused China of unfairly devaluing its currency, marks a reversal for Treasury.
In May, it had declined to sanction China for manipulating its currency.
The U.S. had not put China on the currency blacklist since 1994.
The designation could pave the way for more U.S. sanctions against China.
Earlier, China had allowed its currency to weaken to an 11-year low.
This was a move that gives its exporters a price edge in world markets and eases some of the damage from U.S. tariffs on Chinese products.
Trump had gone on Twitter to denounce China’s move as “currency manipulation.”
He added, “This is a major violation which will greatly weaken China over time.”
In a statement, Treasury said it would work with the International Monetary Fund “to eliminate the unfair competitive advantage created by China’s latest actions.”
China’s central bank sets the exchange rate each morning and allows the yuan to fluctuate by 2% against the dollar during the day. The central bank can buy or sell currency — or order commercial banks to do so — to dampen price movements.
China’s central bank blamed the yuan’s drop on “trade protectionism”, an apparent reference to Trump’s threat to impose tariffs.
Tariffs on the $300 billion in Chinese imports to the United States in addition to the $250 billion he’s already targeted.
For more than a year, the U.S. and China have been locked in a trade war over allegations that Beijing steals trade secrets and pressures foreign companies to hand over technology.