A U.S.-China Currency War? What You Need To Know

Jeannie Matthews
August 13, 2019

Former China central bankers warned Saturday of currency-war risks with the USA after an abrupt escalation of trade tensions between the world's two biggest economies this week.

US President Donald Trump speaks to the press on the South Lawn of the White House before departing on Friday.

The People's Bank of China late Friday called for a "rational" view on current headwinds, signaling that the targeted approach to shoring up output would continue.

That's why investors need to keep a close eye on Sino-US trade tensions. We're talking with China. China wants to make a deal so badly.

The new import duties Trump threatened will be on top of 25% tariffs the USA already imposed on $250 billion in Chinese goods.

Other nations have long scolded the People's Bank of China for its influence on the yuan, claiming it weakens the currency whenever the country needs a leg-up in global trade. The International Monetary Fund trimmed its growth forecast for China to 6.2 percent this year, assuming no new tariffs are imposed, but additional United States tariffs of 25 percent on remaining Chinese goods would cut GDP growth in the following year, the IMF said in a report.

"China wants to do something on trade, but I'm not ready to do anything yet", President Trump said, adding that the American taxpayer is "not paying for" the tariffs now imposed on trade with the country.

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After the meeting, however, Trump announced on August 1 that he would impose 10 percent tariffs on an additional $300 billion worth of Chinese goods.

Trump stood by his currency accusation, saying that the fact that China was subsequently able to stem the yuan's slide CNY=CFXS was proof of manipulation and was offsetting USA tariffs on Chinese imports, blunting their impact on American consumers. I said, 'I can't believe it. The Trump administration is now withholding trade licenses for USA firms that wish to do business with Huawei.

Financial markets have plunged following Trump's announcement, and fell precipitously after China's retaliation.

China's digital currency plan gained traction after Facebook announced details of its Libra cryptocurrency in June.

The currency is meant to be an alternative to cash, and is to be issued on a two-tier system by both the central bank and commercial financial institutions, he said.

However, China has now become a symbol of America's economic and political failure in the world.The popularity of Trump has dropped in recent polls in the United States. This measure of inflation still tracks below the Federal Reserve's target rate of 2% and reflects a slowing down in manufacturing activity amid weaker global demand.

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