What is a currency war and could Trump trigger one?

Marco Green
July 21, 2018

As American farmers start to wonder how much President Donald Trump's trade war with Beijing could cost them, China's government has a cartoon soybean ready to answer their questions.

In particular, manufacturers are finding that their "Keep America Great" hats and "Trump 2020" flags are being held up at usa customs, thus delaying their delivery to customers.

Instead, many analysts say they expect the Trump administration to impose more tariffs on China and potentially other key USA trading partners.

TRUMP TALK: Trump told the TV channel CNBC he was ready to exchange tariffs with China until all of China's exports to the USA - worth over $500 billion a year - are hit.

President Trump said he may be considering placing an additional $500 billion worth of tariffs on China.

Chinese imports from the United States totalled $US205 billion ($276.1 billion) in the first five months of 2018, with the deficit reaching $US152 billion ($204.7 billion).

On Thursday, the European Union said it was developing plans to hit back at the USA if it attempted to place import tariffs on cars, something Trump has repeatedly threatened to do.

Analysts say it's unlikely that China would use the weaker yuan as a weapon in the trade war.

Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018. -China trade war and the other conflicts Trump has ignited.

The U.S. currency extended losses in afternoon trading after CNBC reported that Trump was anxious the Federal Reserve will raise interest rates twice more this year.

"Analysts said the yuan's latest dip came after China's central bank indicated that it was willing to accept a weaker currency", CNN reports, as it will help China's huge export industry cope with new United States tariffs.

Rufus Yerxa, president of the National Foreign Trade Council and formerly deputy director general of the World Trade Organization, said Trump appears to think that America's trading partners will yield to pressure without securing any concessions in return.

China has pledged to retaliate against USA tariffs in "equal scale and equal strength". President Xi Jingping "cannot lose face with his own people by giving in to the United States", Dollar said. "I'm not doing this for politics, I'm doing this to do the right thing for our country". Analysts suggest Beijing is willing to let the yuan depreciate the longer the trade war rumbles on. China also said it would reduce its auto tariffs from 25 percent to 15 percent. "I don't like all of this work that we're putting into the economy and then I see rates going up".

The dollar began taking a hit on Thursday after Trump suggested that the Fed's policy of raising U.S. interest rates was pushing up the dollar, in turn hurting American exporters.

Overnight, the U.S. president launched a "rare attack on America's central bankers", The Guardian says, revealing that he "wasn't happy with their plans to raise USA interest rates".

Other reports by Click Lancashire

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