President Donald Trump's new administration risks setting off a round of potentially destabilizing trade tensions if China is named a currency manipulator, economists and currency strategists told CNBC.
Still, the majority of respondents to a CNBC survey — 25 out of 35 — said they don't believe Trump will officially say China is deliberately devaluing its currency for an export advantage when the Treasury reviews its monitoring list in April.
"It is possible that the U.S. could still call China an FX manipulator unilaterally," said Claudio Piron, co-head of Asia fixed income and FX strategy at Bank of America Merrill Lynch. "But, given that President Trump has already failed to do this on 'day one' of his administration as outlined in his campaign, this seems unlikely," Piron added.
In total, 10 respondents, including former Bank of Japan board member Sayuri Shirai, didn't rule out a Trump pronouncement.
"I cannot imagine Trump will not do anything," Shirai told CNBC. "Trump has said he would deal with manipulators within a short time span, and he could follow-up on his campaign pledge."
Turning that campaign promise into action may raise the stakes in an already tense debate on protectionism and trade, clouding the outlook for the global economy.
"We think he will follow through in April," said Tim Cooper, Global Economic Strategist at BMI Research. "China does not fully meet the traditional criteria of a currency manipulator. But it would set the tone for what we expect will be fraught bilateral negotiations that will probably result in at least some targeted protectionist measures from both sides."
But China may yet dodge the manipulator bullet. Beijing has been engaged in strenuous efforts to support the currency and limit capital flight by imposing tighter capital controls and discouraging speculative bets through selling dollars from its massive foreign exchange reserves.
Speaking with CNBC on Thursday, Treasury Secretary Steven Mnuchin discussed the question of China's currency: "We have a process within Treasury where we go through and look at currency manipulation across the board," Mnuchin said. "And we'll go through that process."
"We'll do that as we have in the past, and we're not making any judgments until we continue that process."
Under rules adopted by the Obama Treasury, China must meet three standards to move it off the watch-list and officially cast it as a currency manipulator. It must hold a trade surplus with the U.S. of above $20 billion, the current account surplus must exceed 3 percent of GDP and official currency purchases must be in excess of 2 percent of GDP. China meets the first criterion only.
"At this current juncture, labeling China as a currency manipulator is erroneous," said Marie Owens Thomsen, Chief Economist, Indosuez Wealth Management.
Slapping a currency manipulator tag on China could be counter-productive, said Adam Reynolds, CEO for Asia-Pacific at Saxo Bank: "If they try to push China, that increases volatility and may depreciate the yuan for a long period which would be bad for global markets."
Many respondents warned that the Trump administration may direct the Treasury to revise the official classification to make the currency manipulator tag stick.
The on-shore yuan traded against the dollar at 6.8725 on Friday morning HK/SIN, climbing from levels near 6.8622 in the previous session. Earlier that day, the People's Bank of China set the yuan mid-point fix at 6.8655. The off-shore yuan, which is more freely traded, was at 6.8549.
Survey respondents said the Chinese yuan will continue to depreciate, with the median of 32 forecasts predicting the currency will drop to 7.2 against the U.S. dollar by the end of 2017. Within the survey, the bounds were predictions of 6.85 and 8.5 dollar/yuan.
Some explained currency expectations as an inevitable response to the White House.
"Asian countries running a trade surplus with the U.S. will try to engineer a stronger currency to diffuse Washington's arguments," said Adrian Mowat, chief Asian and emerging markets strategist at JPMorgan.
"It might be prudent for China to flat-line the currency just to avoid waving a red flag at the bull," added Richard Jerram, Chief Economist at Bank of Singapore. "I take the view that if they tighten capital controls enough then they can have whatever exchange rate they want. Given that growth in China looks okay, they might decide that a stable currency is the path of least resistance."
—CNBC's Evelyn Cheng, Fred Imbert, Dan Murphy and Pauline Chiou contributed to this report.