President Donald Trump’s trade war with China is turning into a currency war—dooming prospects for any sort of trade agreement between Washington and Beijing and ratcheting up the likelihood of a global recession.
This week, in response to Trump’s abrupt decision to hike up tariffs on $300 billion worth of Chinese goods, Beijing briefly let its currency weaken, a natural, market-driven response to a big exporter facing additional hurdles to selling goods overseas. But by allowing the Chinese currency, or renminbi, to fall below the psychological threshold of 7 yuan to the U.S. dollar, Beijing crossed another psychological threshold: Trump’s.
Late Monday, the U.S. Treasury Department officially designated China a “currency manipulator,” the first time the United States has made such a move in 25 years.
The latest U.S. moves all but ensure that catatonic trade talks with China will lapse into a coma, probably until after next year’s presidential elections.
Read the full article and more in Foreign Policy.