WASHINGTON — President Donald Trump’s trade conflict with China escalated last week when Beijing let its currency fall to its lowest level against the dollar in 11 years and suspended its purchases of U.S. farm goods — and the Trump administration promptly branded China a “currency manipulator.”

Trump’s response has little immediate practical impact. But together, the new developments raised the dangerous threat of a destabilizing currency war that could infect the global financial system.

WHAT IS A ‘CURRENCY WAR’?

It occurs when two countries take steps to lower the value of their currencies to try to gain a competitive edge over each other. A cheaper currency typically makes a nation’s exports more affordable for foreigners — and makes imports more expensive. This action tends to protect a country’s manufacturers, in particular, from foreign competition.

ARE THE U.S. AND CHINA IN A CURRENCY WAR?

For now, no. The Trump administration has yet to respond to China’s allowing its currency to fall by taking its own steps to lower the dollar’s value to the yuan. Still, this could happen: The option was raised in the White House late last month, according to media reports, and Trump said July 26 that he could take steps to devalue the dollar “in two seconds if I want to.”

And earlier that month, Trump had tweeted that China and Europe were “playing (a) big currency manipulation game” and the U.S. either “should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games.”