August 06, 2019

Currency War With China Dooms Trade Talks

Featuring Rachel Ziemba

Source: Foreign Policy

Journalist Keith Johnson

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.

Authors

  • Rachel Ziemba

    Adjunct Senior Fellow, Energy, Economics, & Security Program

    Rachel Ziemba is an Adjunct Senior Fellow at the Center for a New American Security (CNAS). Her research focuses on the interlinkages between economics, finance and security i...