It looks like the trade war with China has just been pushed into overdrive, with China devaluing its currency after Trump announced more tariff’s last week:
CNN – The Dow tumbled more than 950 points and global stocks were in disarray on Monday after China escalated the trade war with the United States.
The Chinese government devalued the yuan to fall below its 7-to-1 ratio with the US dollar for the first time in a decade Monday. A weaker currency could soften the blow the United States has dealt China with its tariffs.
The weak yuan ignited fear on Wall Street that a currency war has begun or that the United States would respond with even higher tariffs, prolonging the standoff with China and potentially weakening the global economy. Investors are particularly concerned that the Trump administration could try to devalue the dollar, sparking a currency war that could weaken Americans’ purchasing power.
“Risks of Trump intervening in foreign exchange markets have increased with China letting the yuan go,” wrote Viraj Patel, FX and global macro strategist at Arkera, on Twitter. “If this was an all out currency war – the US would hands down lose. Beijing [is] far more advanced in playing the currency game [and has] bigger firepower.”
President Donald Trump once again called China a currency manipulator on Monday, saying the yuan devaluation was a “major violation.” Trump has long attacked China for its currency policy, even though the Treasury has refrained from officially labeling the country a currency manipulator.
China announced Monday its companies have halted purchases of American agricultural goods. That helped to drive stocks even deeper into the red.
Trump responded on Twitter:
China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the Tariffs – they are being paid for compliments of China, and the U.S. is taking in tens of Billions of Dollars! China has always….
— Donald J. Trump (@realDonaldTrump) August 5, 2019
….used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
Right now the Dow has recovered some and is only down 770 points. But the day isn’t over yet.