Looks like both sides are digging in for a long trade fight.
Big update everyone: About two hours after this blog went up, the Treasury Department announced it is naming China a currency manipulator. As AAM President Scott Paul wrote on Twitter dot com, this move is long overdue, since China has been manipulating its currency for a long time. But it's pretty clear this is also Trump's next move against China…. any thoughts on what happens next?
Trade warrin’! The Trump administration is still deep in a trade dispute with the Chinese government. Last week President Trump sent U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Shanghai for high-level talks with Vice Premier Liu He …
US Trade Representative Robert Lighthizer shows his Chinese counterpart an example of the astonishing advances the US has made in the field of "almost lifelike" AI. pic.twitter.com/buiBUu1BMZ
— Belarus News (Eng.) (@BelarusMiniInfo) July 31, 2019
… and it didn’t go super well. The president wanted agricultural purchases he could announce at a political rally in Cincinnati. But the American delegation was on the ground for approximately 24 hours, and the Chinese side offered no meaningful delegations. And so Lighthizer and Mnuchin returned, talked to the president and – according to the Wall Street Journal – he overruled almost all of his gathered advisers to dial up more tariffs. Naturally he announced them on Twitter:
…during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…
— Donald J. Trump (@realDonaldTrump) August 1, 2019
The Associated Press story on the president’s announcement noted "the Chinese foreign and commerce ministries didn’t immediately respond to questions about how Beijing would react."
Well! We know now!
They’re dropping the value of their currency to help counteract the drag the tariffs have created on Chinese industries. This could cause other countries to devalue their currencies as well in a race to keep their exports competitive.
Remember, it was only a few months ago that the U.S. Treasury Department declined to label China a “currency manipulator,” which would open up further retaliatory options for the Trump administration. We’ll see if Treasury demurs again in a few months when it reviews its manipulator list.
Anyway, the president is hoppin’ mad about the devaluation (on Twitter) and the stock market had a huge sell-off on Monday, which he most assuredly noticed. I’ll be interesting to see how this development affects his next move.