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Fri May 17, 2019, 09:33 PM

China Is Running Out of U.S. Goods to Tariff, But It Has Other Trade War Weapons to Unleash

By EAMON BARRETT 8:00 PM EDT

When President Donald Trump suddenly hiked tariffs on $200 billion worth of Chinese imports last week, China said it would respond with “necessary countermeasures.” But then it announced a tariff increase on just $60 billion of U.S. goods. China simply doesn’t import enough from the U.S. to match tariffs “tit-for-tat,” hence the $140 billion shortfall in its retaliation. However, China has other aces up its sleeve.

Let the renminbi slip

China’s softening economy coupled with the fallout of increased export tariffs will put downward pressure on its official currency, the renminbi, which is also referred to as the yuan. The central government has tended to prop up the renminbi in recent years to spur China’s transition to a consumption-led economy. However Chen Long, a China economist at consultancy Gavekal Dragonomics, argues it is now in Beijing’s best interest to let the renminbi slide.

“The renminbi exchange rate is one of the most powerful weapons Beijing has in the trade war with the U.S.,” Chen wrote in a report released Tuesday. Chen argues that a weaker yuan would support China’s exporters. While China’s importers would be worse off, the benefits outweigh the costs because China is a net exporter. But, more importantly, a depreciated renminbi could rattle global markets and, consequently, pressure Trump to switch tack.

“If Beijing were not to stand in the way of a 3-5% depreciation in the renminbi, fears would grow that the stuttering Chinese economy was exporting deflation to the rest of world, and global markets—and the U.S. stock market in particular—would likely take fright,” Chen writes, arguing that a “sharp correction” in the U.S. markets could convince Trump that making a swift deal is in his best political interest.

More...

http://www.fortune.com/2019/05/17/us-china-trade-war-tariffs-leverage/

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Response to RCW2014 (Original post)

Fri May 17, 2019, 10:41 PM

1. RC sides with the enemy again.

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Response to Da Mannn (Reply #1)

Fri May 17, 2019, 10:46 PM

2. I post a OP from Fortune.com and that proves I "side with the enemy again"?

Good grief...

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Response to RCW2014 (Original post)

Fri May 17, 2019, 11:19 PM

3. It often appears Trump does not worry as much about his political interests as he does...

delivering on his promises. The Chinese are unfamiliar with presidents who are not life long political hacks and find it difficult to deal with Trump.

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Response to batcat (Reply #3)

Fri May 17, 2019, 11:36 PM

4. I just can't call it how a real trade war with China could shake out. For every article I read

that there is nothing to worry about, I read another that says "hang on to your ass".

Above my pay grade and most others, imo.

Stay tuned...

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Response to RCW2014 (Reply #4)

Fri May 17, 2019, 11:57 PM

5. I also have no idea how this will play out. ...

I can hope Trump is once again able to accomplish something the experts feel is impossible but realistically he can’t win every battle and losing the trade war with China could easily cost him his re-election.

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Response to RCW2014 (Original post)

Sat May 18, 2019, 06:01 AM

6. ''a weaker yuan would support Chinas exporters''...and fuck over the chinese people with inflation.

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