In A Historic Move, US Declares China As Currency Manipulator Escalating Trade & Currency War
- First time since 1994, the U.S. Treasury Department labeled China a currency manipulator
- Another step in the currency war & further escalation in US-China tension
- Citi analyst expects US to raise tariffs on recently announced $300 billion Chinese goods “as soon as next month”
- While stocks registered worst day of the year, BTC soaring by 23.9% in past 7 days
The US Treasury Department on Monday designated China as a currency manipulator in a historic move that hasn’t been exercised since the Clinton administration.
“Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release.
“As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions.”
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
The formal designation came after China allowed its currency to break the important psychological level.
“In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past,” the Treasury Department added.
“The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade.”
Another Step In The Currency War & Further Escalation In US-China Tension
The yuan fell to 7 against the dollar for the first time since 2008. Now, that the Treasury has designated China as a currency manipulator, “this is another step in the currency war,” said Marc Chandler, chief market strategist at Bannockburn.
This marks further escalation in US-China tension, with Citi analyst expecting Washington to raise tariffs on recently announced $300 billion from 10% to 25% “as soon as next month.”
The next step for the US is to make its case to the IMF but is not likely to lead to formal penalties. The label of a manipulator is mostly symbolic without “major consequences on its own,” Goldman Sachs analysts said in a report.
While Stocks Registered Worst Day Of The Year, BTC Soaring
Depreciating yuan has been one of the measures to offset the drag from tariffs as it makes Chinese goods relatively cheaper. Such a move also makes the US dollar stronger, which the American President has said he dislikes.
We have already seen how Bitcoin reacts to this trade and currency war. The leading cryptocurrency is presenting itself as a hedge against these risks and a store of value like gold while stocks had their worst day of the year on Monday.
Nasdaq down 3.4% Dow down 2.9%. Bitcoin up 3.2%. Bitcoin may be a remarkable hedge. #bitcoin
— Tim Draper (@TimDraper) August 6, 2019
In the past 7 days, BTC price has surged 23.9% while stocks in Asia ended in red on Tuesday though they did claw back some of their losses and US stock futures rebounded after yuan recouped some of its previous losses.