Fox Business posted an article today about the devaluing of the Chinese yuan. The devaluing of the Chinese currency (currency manipulation) has been used by China for decades to grow their economy at the expense of America. It has been used to lure manufacturing away from America, impact our trade balance, and generally work against the American economy. We have needed to combat this practice for decades, but no President had the courage.
The article reports:
The onshore Chinese yuan weakened to worse than seven per U.S. dollar, hitting its lowest level since 2008, as Beijing looks to cushion the blow from Trump’s tariffs. A weaker yuan makes Chinese goods cheaper for overseas buyers, which may be necessary as China just lost its spot as the US’s biggest trading partner.
Trade data released Friday by the Department of Commerce showed U.S. imports from China fell by 12% in the first six months of the year, allowing Mexico to supplant it as the U.S.’s biggest trade partner.
“China dropped the price of their currency to an almost a historic low,” Trump tweeted Opens a New Window. on Monday. “It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”
Last week, Trump said beginning Sept. 1 the U.S. would place a 10% tariff on the remaining $300 billion of Chinese goods. He went ahead with the announcement despite objections from his advisers.
The president warned he could “always do much more” with respect to tariffs, adding the 10 percent tax could go “well beyond 25 percent” if necessary. Earlier this year, the administration placed a 25% tariff on $250 billion worth of Chinese goods.
Weakening the yuan isn’t the only form of retaliation Beijing took on Monday. It also ordered state-owned enterprises to stop purchases of U.S. agricultural products, according to a Bloomberg report, citing people familiar with the situation.
That is a reversal from just last week, when Beijing said it had purchased several tons of U.S. soybeans Opens a New Window. as a gesture of a goodwill amid trade negotitations. Before the trade war began, China was the largest buyer of U.S. soybeans, accounting for 70% of all purchases, but their imports have fallen by 97% since the trade war began.
The article notes:
Over the weekened, The Trump administration pushed back against the idea the trade war was hitting the wallets of U.S. consumers.
“China has strategically gamed the tariffs by slashing their prices and by devaluing their currency,” White House trade advisor Peter Navarro told “Fox News Sunday.”
This trade dust-up with China may get ugly, but it is something that has to be done.