As investors prepare for the biggest escalation yet in the Trump Administration’s trade war with China, the debate about the strength of the Chinese yuan rages on.
The currency saw a decline following previous rounds of tariffs, but since then there has been evidence that this was a controlled decline allowed by policymakers to blunt the impact of tariffs. Following the People’s Bank of China’s re-introduction of the “counter-cyclical factor” (CCF), the yuan has firmed up, indicating that Beijing has effective tools to steady the currency.
An expected new round of tariffs, affecting US$200 billion of Chinese imports, will, however, have a much larger impact relative to anything implemented thus far. Media reports indicate the tariffs could either come into effect as soon as this week, or be delayed or phased in. It is also unclear whether Trump will opt to set the tariff rate at 25%, as threatened, or will end up going with the 10% originally proposed.
Analysts at Chinese financial news outlet Caixin see the new tariffs having a limited effect on the yuan, though the impact may depend on the details of the tariffs implementation. The escalation is already priced into the market to some extent, but should the Trump administration choose to implement the tariffs on the full list of goods at the 25% rate this week, there is a greater chance of a shock.
Regardless of how the duties are imposed, the analysts wrote in a newsletter on Monday, the effectiveness of the tools at policymakers disposal, including the CCF, make it unlikely there will be a severe weakening of the yuan.
The US has no choice, it loses so or so. At least it will have put up a fight to stop the economic downward spiral. The present US economy is an air baloon that will burst in a few weeks time.
China has mor scietific patents per year than the US and EU together.
Yashad Rizvi Have you ever tried to google Trump’s wealth? Wishing you luck. His wealth, due to 6 bankruptcies, is so fragile that he needs almost daily US stock manipulations via negative Twitter comments, tafter placing short selling orders, and changing his mind the following day, to reap in his profit. I say this, assumig you have at least the slightest idea how stock markets work, which, looking at your ‘enlithening’ comments, I seriously doubt. You will have the chance to see this week how Trump manipulates the stock market by retracting his statement to impose $200 billion tariffs on China "maybe this week", which made the stock market to go down. It won’t happen this week, of course, and the stock market will move back up again, and Trump will have made another profit on his oral noise.
One can’t underestimate a fool. US voters will soon realize that overestimating a fool is worse.
Why does nobody load this despicable US president on a truck and bring him to a sanatorium for life?!