China trade deal in doubt, Trump says United States 'not ready'

Daniel Fowler
Августа 11, 2019

While a weaker currency is a natural outcome of China's worsening economy and a central bank in easing mode, Monday's sudden depreciation made it a target of criticism from the Trump administration.

The US dollar (USD) wrapped up its after-hours session just a tad higher versus most of its counterparts late Thursday, but it was the Chinese yuan (CNY) that stole the show after China's central bank fixed the currency and elevated it on a stronger position.

Further into the bargain, a surprise surge in China's exports on July had overhauled currency traders' risk-appetite and eased frets of a currency war.

"If President Trump goes ahead with the 10% tariffs on all remaining Chinese goods come September 1, that's really going to increase the price of things like electronics", Locke said.

- an annual $20 billion bilateral surplus with the U.S. Companies are also coming to the big numbers.

Tensions between the world's two largest economies further intensified this week after the USA officially named China a "currency manipulator" following a sharp drop in the value of the yuan against the United States dollar.

"It's extremely hard to make an objective case that this is warranted", said Obstfeld, now an economics professor at the University of California-Berkeley.

China devalued the yuan in 2015 in an attempt to curb depreciation pressure, stunning global markets.

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The International Monetary Fund has been reluctant to comment on the US move.

For the moment, European nations are in no mood to aggravate China or support Trump given his threats to impose tariffs on EU exports, said Stephanie Segal, a former senior Treasury official now at the Center for Strategic and International Studies.

Washington is delaying a decision about licences for U.S. firms to restart trade with Huawei Technologies, according to Bloomberg, while U.S. Senator Marco Rubio urged the White House on Thursday not to allow exception to the ban.

"China will bear virtually the entire burden of that through the currency manipulation and by slashing prices", Navarro said.

Relations have soured further in the past week after Mr Trump announced a new round of punitive tariffs on Chinese goods, despite a truce agreed with Chinese President Xi Jinping in May, and Beijing responded by halting all purchases of USA agricultural goods.

Since the U.S. -China trade war began in April 2018, when Washington unveiled the first tariffs on some Chinese imports, the offshore yuan has tumbled 11% versus the dollar.

However, ING cautioned there is a chance the yuan could fall further if the trade war continues to escalate. "The administration seems to be saying that the Chinese authorities could have prevented the yuan from declining and didn't".

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