{"id":49834,"date":"2018-07-23T15:00:40","date_gmt":"2018-07-23T23:00:40","guid":{"rendered":"http:\/\/www.cogwriter.com\/news\/?p=49834"},"modified":"2018-07-23T06:56:15","modified_gmt":"2018-07-23T14:56:15","slug":"u-s-china-trade-war-is-now-becoming-a-currency-war-too","status":"publish","type":"post","link":"https:\/\/www.cogwriter.com\/news\/prophecy\/u-s-china-trade-war-is-now-becoming-a-currency-war-too\/","title":{"rendered":"‘U.S.-China trade war is now becoming a currency war, too’"},"content":{"rendered":"

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COGwriter<\/a><\/p>\n

Currency manipulation is in the news:<\/p>\n

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U.S.-China trade war is now becoming a currency war, too<\/h2>\n

July 23, 2018<\/p>\n

President Trump is laying into China and the European Union as currency manipulators, accusing them in a tweet last Friday<\/a><\/span> of “manipulating their currencies and interest rates lower” in an effort to get an edge over the United States by making their goods and service cheaper to buy in the U.S. He added that American businesses should be allowed to recapture what was lost due to “illegal currency manipulation and BAD trade deals.”<\/p>\n

Confirming the President’s concerns, U.S. Treasury Secretary Steven Mnuchin told Reuters his department is closely monitoring China’s currency markets for signs of manipulation. Goldman Sachs analysts on Friday warned clients that the current “trade war is evolving into a currency war.”<\/a>\u00a0 … a cheaper currency is seen as one potential way to offset Trump’s growing list of new import tariffs against China.<\/p>\n

And, indeed, the yuan has been weakening lately, falling roughly 15 percent against the dollar since January<\/a><\/span>. Whether this is a conscious policy move by Beijing (China has a semi-managed currency vs. a free-floating currency like the U.S. dollar) or investors acting independently (on fears tariffs will weaken China’s economy) is an open question.<\/p>\n

Just in terms of pure repricing of Chinese imports into the United States, the yuan’s fall would would more than reverse Trump’s last threat of a 10 percent tariff on an additional $200 billion in Chinese goods. Which comes after a 25 percent tariff increase on $50 billion in Chinese goods, known as the “Section 301” actions taken in retaliation for claims of forced technology transfers by China against American companies. https:\/\/www.cbsnews.com\/news\/trump-china-eu-currency-manipulators-tariff-trade-wars-hit-us-dollar\/<\/a><\/p><\/blockquote>\n

Unlike a military war, a currency war involves no physical violence. Basically, countries will devalue their currency to make their goods less expensive for other nations to buy while also making imported goods cost more. The basic intent is to get keep\/more jobs in the country.<\/p>\n

Tariffs, such as Donald Trump has implemented and threatened to implement, make foreign goods cost more. So, currency devaluation (which when intentional can be considered a currency war) is intended to reduce the impact of tariffs.<\/p>\n

However, there still is a cost to devaluations and this can cause inflation and other problems for the country whose currency is devalued.<\/p>\n

China says that it is not devaluing its currency:<\/p>\n

July 23, 2018<\/p>\n

BEIJING (Reuters) – China said on Monday the value of its currency is driven by market forces and that it has no intention to devalue the yuan to help exports, after Washington said it was monitoring the currency\u2019s weakness amid the escalating bilateral trade row. …<\/p>\n

At a daily news briefing, ministry spokesman Geng Shuang was asked about comments on Friday by U.S. Treasury Secretary Steven Mnuchin, who told Reuters the yuan\u2019s weakness would be reviewed as part of the Treasury\u2019s semi-annual report on currency manipulation, which is due on Oct. 15. …<\/p>\n

Geng said the value of the yuan was subject to the forces of demand and supply, and that healthy economic performance offered support for its level.<\/p>\n

\u201cChina has no intention to use means like the competitive devaluation of its currency to stimulate exports,\u201d he said. …<\/p>\n

Earlier this month, the United States imposed tariffs on $34 billion of Chinese imports. China promptly levied taxes on the same value of U.S. products.<\/p>\n

\u201cWe advise the U.S side to remain calm and maintain a rational attitude,\u201d Geng said. https:\/\/www.reuters.com\/article\/us-usa-trade-china\/china-says-it-wont-devalue-currency-to-bolster-exports-idUSKBN1KD0R7<\/a><\/p><\/blockquote>\n

China seems to have been letting the market devalue its currency.<\/p>\n

Here is more information about currency wars:<\/p>\n

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A currency war refers to a situation where a number of nations seek to deliberately depreciate the value of their domestic currencies in order to stimulate their economies. Although currency depreciation<\/a> or devaluation<\/a> is a common occurrence in the foreign exchange market<\/a>, the hallmark of a currency war is the significant number of nations that may be simultaneously engaged in attempts to devalue their currency at the same time. …
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A currency war is also known by the less threatening term\u00a0 “competitive devaluation<\/a>.” …<\/p>\n

Since it is not too difficult to pursue growth through currency depreciation \u2013 whether overt or covert \u2013 it should come as no surprise that if nation A devalues its currency, nation B will soon follow suit, followed by nation C, and so on. This is the essence of competitive devaluation.<\/p>\n

This phenomenon is also known as “beggar thy neighbor<\/a>,” which far from being the Shakespearean drama that it sounds like, actually refers to the fact that a nation which follows a policy of competitive devaluation is vigorously pursuing its own self interests to the exclusion of everything else. …<\/p>\n

So what are the negative effects of a currency war?<\/p>\n