President Donald Trump accused China on Monday of "currency manipulation," shortly after Beijing struck back with its own retaliation as the trade war continues to escalate.
By Miami Diario Newsroom
In response to Trump's threat to impose a 10% tariff on 300.000 billion dollars of Chinese products, the Asian country allowed its yuan to fall to its lowest level in more than a decade and asked state-owned companies to suspend imports of US farm products.
Stocks opened sharply in the red, and the Dow fell 500 points, as investors did not see the end of the long trade war.
The move prompted Trump to call out China for "currency manipulation," while the Federal Reserve was told the yuan's low level is a "serious violation." It is the Treasury Department's responsibility to label US trading partners for meddling in its currency, which the Trump administration has so far failed to do. But it seems that Trump hopes that the depreciation of the yuan will force the Federal Reserve to cut interest rates even more.
In late May, the Treasurer once again refused to label China a currency manipulator, despite Trump's promise to do so during his 2016 campaign. Instead, the country was put on the "watch list." Treasury in its review of US trading partners along with eight other countries.
To be fair, the Treasury Department report highlighted "significant concerns" about the significant depreciation of the Chinese currency against the dollar a critical component of the ongoing trade talks, and urged China to take steps to avoid "a persistently weak currency."
Trump has repeatedly argued that the Chinese have slowly depreciated their currency in the past year to help offset tariffs on billions of dollars of Chinese goods amid an ongoing trade war between the two major economic superpowers.
Economists generally agree that the weaker currency, whether by design or not, has softened the blow of tariffs on China by making it cheaper. But the risk of the trade dispute turning into a currency war has also increased.
People's Bank of China Governor Yi Gang said in a statement Monday that China will not use the yuan as a tool in its trade dispute with the United States.
"I am fully confident that the yuan will remain a strong currency despite recent fluctuations amid external uncertainties," Yi said.
Last week he abruptly triumphed in escalating trade talks shortly after trade talks resumed, proposing a third tranche of tariffs due to take effect on September 1. He has also threatened that those Tariffs could go up to 25%, or even more.
The new tariffs could hit US consumers harder than in previous rounds. It would tax goods like iPhones and other consumer electronics, sneakers and toys. Last year, Trump imposed tariffs on some $250.000 billion of Chinese-made products, intended for industrial materials and components.