The Trump administration is railing against Chinese currency manipulation without any regard for the yuan’s actual ups and downs. Yes, the numbers superficially back Treasury Secretary Steven Mnuchin’s warnings: The yuan has dropped about 10% against the dollar since mid-April, effectively offsetting the impact of U.S. tariffs on Chinese goods. But this doesn’t prove that China is defying the laws of market economics. In fact, Beijing is doing precisely the opposite.

One law of economics: Fiscal expansions and monetary contractions...