Author Topic: China’s Currency Moves Escalate Trade War, Rattling Markets  (Read 2451 times)

Offline Johnnie F.

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WASHINGTON — The trade war between the United States and China entered a more dangerous phase on Monday, as Beijing allowed its currency to weaken, Chinese enterprises stopped making new purchases of American farm goods and President Trump’s Treasury Department formally labeled China a currency manipulator.

The escalation shook world markets as nervous investors looked for safe places to park their money. Wall Street suffered its worst day of the year, with the S&P 500 closing down nearly 3 percent. Selling was especially heavy in the trade-sensitive technology, consumer discretionary and industrial sectors.

Yields on United States Treasuries, which fall as prices rise, dropped as investors sought safety in government-backed bonds. Benchmark indexes in Asia and Europe also fell. The sell-off looked poised to continue into Tuesday, as Asian markets slumped again and futures markets predicted a glum Wall Street opening.

On Sunday, the People’s Bank of China, that country’s central bank, took steps to limit the impact of Mr. Trump’s next round of tariffs by letting its currency weaken past the psychologically important point of 7 renminbi to the American dollar for the first time in more than a decade.

A weaker currency can make goods cheaper to sell abroad, allowing businesses and consumers to help offset the additional tariffs Mr. Trump plans to impose on Sept. 1. It also harms American exporters that are trying to compete with China.

Chinese officials said the move came in response to market forces, which have reacted to Mr. Trump’s tariff threats by pushing the value of the currency down. In an unusually blunt statement, the central bank put the blame for the currency fall on Mr. Trump’s “unilateralism and trade protectionism measures and the imposition of increased tariffs on China.”

Chinese enterprises also halted new purchases of American agricultural goods in response to Mr. Trump’s decision to impose more tariffs. China’s state-run Xinhua News Agency called the president’s move a “serious violation” of an agreement reached in June with President Xi Jinping of China.

Late Monday, the Treasury took the unusual step of labeling China a currency manipulator — the first time it has done so since 1994. In a statement, the Treasury said that Steven Mnuchin, the Treasury secretary, “will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions.”

The action is mostly symbolic, requiring the administration to consult with the International Monetary Fund to try to eliminate the unfair advantage the currency measures have given a country. But China is likely to view the label as a rebuke, further escalating pressures between the countries.

New York Times

The impact upon us expats in Thailand? The Euro did some jumps up in its rates to Thai Baht and US Dollar, the British Pound to the Thai Baht regained a little but still remained about as miserable and the US Dollar to the Thai Baht went on a steady low, is continuing in the slump.