Chinese yuan wilts again, cushioning the blow of Trump tariffs

Cornelia Mascio
Luglio 21, 2018

In his CNBC interview Friday, Trump shrugged off the prospect that a trade war with China could cause the stock market to tumble.

US indexes were poised to open lower, with S&P 500 futures down 0.2 percent and Dow futures 0.4 percent lower.

"More expensive soy can mean that China will look to other sources for the bulk of its imports", the cartoon continues, adding, "As two of the top soybean suppliers to China, Brazil and Argentina could pick up the slack".

Fears are growing over a fierce global trade war, after Trump's imposition of hefty import taxes on steel and aluminium from the EU, Canada, and Mexico, in addition to levies already on goods from China worth tens of billions of dollars that have sparked retaliatory tariffs.

In an interview with CNBC television broadcast Friday, Trump threatened to slap all Chinese imported goods with tariffs, risking an escalation in global trade war tactics.

The latest report, which cited a White House official, followed Trump's criticism on Thursday of the Fed's interest rate policy and the strong dollar, saying that it could hurt the USA economy.

"I'm ready to go 500", the Republican leader told the U.S. network CNBC, referring to the US$505.5 billion (RM2.055 trillion) in Chinese imports accepted into the United States in 2017. China retaliated on the first wave of tariffs by slapping duties on the same dollar amount of USA imports, and Beijing has said it'll fight against any further US actions.

Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018.

USA stocks finished the session mildly lower, with Trump's comments on trade and the Fed offsetting a round of mostly solid U.S. earnings reports. A big reason is bad (terrible) Trade Deals with other countries.

In a break with the usual practice by U.S. presidents, Trump has been unusually vocal about the dollar, publicly criticizing its strength several times, though analysts question whether his frequent rhetoric will have a lasting impact.

Earlier this month, the United States imposed tariffs on US$34 billion of Chinese imports.

The People's Bank of China (PBOC) is increasingly favoring a weaker currency as it would help the economy absorb shocks from trade war with the US.

"Our currency is going up", Trump said.

China will likely retaliate if additional tariffs are imposed, economists note, rather than simply knuckle under.

"We're down a tremendous amount", Mr Trump said in an interview about trade imbalances with China on CNBC.

As the world's largest economies open up a new front in their increasingly acrimonious game of brinkmanship, the consequences could be dire - and ripple far beyond the United States and Chinese currencies.

After Beijing offered this spring to buy more natural gas and farm goods from the U.S.to narrow the trade deficit, Treasury Secretary Steven Mnuchin said the trade war was "on hold".

"I'm not doing this for politics - I'm doing this to do the right thing for our country", he added. China also said it would reduce its auto tariffs from 25 percent to 15 percent.

Mr Trump has voiced his opinions on trade with China since before his election, and on the campaign trail promised to label Beijing a currency manipulator within the first 100 days of his presidency - a pledge he has not yet fulfilled. Given the strength of the United States economy, the Federal Reserve is expected to keep raising interest rates.

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