How The US-China Trade War Turned Into A Currency War

The trade war took a dangerous turn and
is now morphing into what many are
calling a currency war.
It’s all out economic warfare between
the two biggest economies in the
U.S. and China.
Two key developments took us here.
The Chinese currency weakened passed
a significant level that investors
were thinking maybe China would
defend—an indication perhaps that China
was stepping up its fight
in the trade war.
The U.S.,
in response, designated China a
currency manipulator, something that the
U.S. Treasury hasn’t done since 1994.
And while mostly symbolic, was seen as
a big aggressive move to call China
out and just escalate this
trade tension even farther.
What makes it difficult is that when
you have a currency war, everybody
wants a weaker currency.
Weaker currencies help your exports stay
more competitive on a world
stage. But not everybody can
have a weaker currency.
So in response to the U.S.
and China’s moves on currencies, we
saw other central banks and economies
take action like India, Thailand and
New Zealand, all surprising their
markets through monetary policy and
all weakening their currencies.
If everybody races to the bottom, it
can be very disruptive to markets and
to the global economy.
When the Treasury formally calls out
another country for being a currency
manipulator. Not much happens.
It’s largely symbolic.
It’s a badge of dishonor.
It’s considered embarrassing and puts that other
country at the top of the
G-20 agenda for discussing what
it’s doing with its currency.
In practice, not
much explicitly happens.
The Treasury engages the International
Monetary Fund and China in
negotiations and discussions about what
the currency has actually been
doing and how they’re
going to fix it.
However, this administration doesn’t necessarily
play by the same rulebook.
So many are worried that by
designating China officially a currency
manipulator, President Trump could use that
politically and on the world
stage to just impose more tariffs,
other sanctions and other economic
punishments. Now, that’s not necessarily in
the Treasury rulebook for how
this goes.
But we’ve seen President
Trump break the rules.
Mostly everybody wants
a weaker currency.
There are benefits to having
your currency be weak.
Number one, it makes
your exports more competitive.
If you’re Japan and selling Hondas and
Toyotas to Americans, it gives them
an edge over companies
like GM and Ford.
It also makes
earnings more competitive.
S&P 500 earnings have gotten hit this
year because the dollar’s been so
Anybody that does business overseas, from
Apple to Procter and Gamble to
the automakers to John Deere, which
President Trump also called out during
a tweet, their earnings and their revenues
get cut by that strength of the
dollar. They sell overseas.
It’s less competitive.
They bring the money back home.
It’s worth less.
We’ve learned this lesson
so many times.
And that is currency wars and
tensions fueled by countries trying to
weaken their currencies can have a
very destabilizing effect on growth and
on stock markets.
It happened in 2015.
China made a surprise decision to let
its currency weak and devalue the
yuan. Guess what?
That led the S&P 500 into a
correction, 10 percent off the highs.
That’s why as soon as we saw
China let its currency weakened, it sparked
all sorts of concerns, not just about
the escalation of the trade fight,
but about what’s really happening
beneath the surface in China.
When countries devalue their currencies, it
leads investors to wonder, is
their economy suffering
worse than expected?
Are they going to have to deal
with capital flight, a scary prospect where
people take money out
of their economy.
We’re not talking about in a small
emerging market like Turkey, where we
had these concerns.
We’re talking about China, one of the
biggest markets in the world and the
second biggest economy in the world.
When you have other countries stepping in,
then to fight to protect their
economies and their currencies, it’s this notion
of a race to the bottom
on interest rates and on currencies.
And that is what spooked markets.
The fact that it’s going to be unpredictable,
it’s going to be a source of
tension and ultimately it’s going to
kill growth because tensions put up
walls between countries.
Trade slows down.
Tensions emerge.
And that’s sort of been the theme of
what we’ve been seeing on trade and
now currencies in 20 19.


  1. i dont give a DAMN about stocks and profits and alll that garbage that masss media always spew. it is all about values. morals and doing the RIGHT thing. MAGA 4 life!!!!

  2. The trade war is not morphing into a currency war. That assumes the trade war came first. Quite the opposite is true. Countries going off the gold standard in the 1930's triggered a currency war, which inevitably leads to trade wars.

  3. The last time I checked we owed China a Trillion Dollars… When Obama was in office along with other Presidents…..I'm confused. Can someone help me please, I don't like feeling lost….ughhh. The U.S. has tariffs on China (but we owe them). Now China is retaliating against us….SMH. Can someone please school me and point me in the right direction…This is BS…ugh

  4. americans are dumb people, they are also uneducated and it's very easy for US government or the deep state to control them, but now USA is in very bad situation, they have enormous debt, the US economy is going in recession, the people are divided,  they have clown-lunatic for president, so what US needs is to find some imaginary enemy to unite the people. Russia is already too well-known and it has weapons which can destroy USA so it's dangerous to play with it, and here it comes China, China is the new "enemy", it's the modern USSR, and as everyone can see the government officially considers China as enemy N1, it started trade war, soon maybe and cold war, but however all americans should unite against China, at least that's the plan of US deep state, but unfortunately they have problems to do it, especially outside USA.
    so i expect next year after the elections, there'll be a huge problem with US economy, it may even collapse and there'll be riots as in Hong Kong or maybe a civil war in USA.

  5. Japan is doing the exact same thing as the US to China. The purpose is to stifle technology development of South Korea, because Japan feels threatened.

  6. After so many rounds of tariffs, China would be manipulating their currency if the Yuan does not fall. You just cannot wish to hit them hard and expect them doing great.

  7. What America has been doing to China in this evil war is simply bullying. Every country can see that. The world is returning to the order of the forest – violence, robbery, bullying, and more to come.

  8. Every news network is trying to re spin the story on companies leaving China.China is kicking US companies out.Trump has very little to do with that besides being the instigator.Trump knows he will not finish out his term if China follows through.

  9. Pres. Trump should not postpone the scheduled tariffs on Chinese goods while they are talking, as this is only a ploy by china to delay any mutually beneficial trade deal.  Make note that China, under the CCP, cannot be trusted.  They formerly agreed to the terms of the initial trade negotiations with the US only to renege on that agreement in the end.  They also promised NOT to militarize their illegally reclaimed artificial islands in the Spratly archipelago (in the South China Sea), but had already installed surface-to-air and anti-ship missiles on those structures.  They agreed with the UK to maintain the current system of government and laws in Hong Kong until 2047, but they have slowly curtailed some of the people's rights and liberties, resulting in the continuous protest rallies of the people against the communist regime's initiatives.  There is an old saying that goes:  "You fooled me once, shame on you.  You fooled me twice, shame on me."

  10. The way the currency shifted, looks good if US dollars is changed to the Chinese Yen (RMB) Americans can buy more in China.
    If Chinese shoppers, business men, or STUDENTS comes to the US, They have to spend more to get the same amount.

  11. IDK, what's with Americans, honestly.
    Trump is just doing what's right for America, What's wrong with the Nation and Citizens first policy?
    How does one right the unemployment then??

  12. Huang Xiangmo's Leo Liau had taken his own life,Chinese billionaire gave $100,000 cash to NSW Labor 和髸产党黄向墨收买澳大利亚政客的Leo Liau自杀了,豚王毅杨洁篪习近平

  13. We want to buy your high-tech products to make up for the trade surplus. Do you sell them? We trade dollars at the expense of the environment, and the U.S. government just prints dollars.

  14. There's a difference between something being in the rulebook in other words being precedent or tradition and something actually being a rule

  15. I had to stop watching as she attached Trump. It's good to put the right info but also attaching the President at the same time is bad journalism. The bias needs to stop what happened to just facts

  16. What? No mention that the U.S. has three criteria for identifying a currency manipulator and that China only meets one of these criteria (a trade surplus with the U.S.). No mention that the IMF and the rest of the international community claims that China is not manipulating their currency? No mention that the U.S. dollar is presently artificially inflated in value so of course other currencies would lower in value relative to it unless they manipulated their currencies in order to peg them to the dollar? (The yuan is pegged to the Euro, not the dollar). Nice reporting, almost missed all the important points of discussion.

  17. The truth is if China doesn't manipulate the currency, Chinese Yuan would drop even more due to more and more manufacturers move out of China… that is definitely not something the US wants to see…

  18. Who started this trade war in the first place? THE USA! The world economy is only better when the US has sensible and not bullying policies.

  19. "When you can't beat a nation mentally, try and start a war with them." The US and it's depraved people are just waiting for God's wrath.

  20. Don't be misleading. China does not devalue its currency, it just stop popping it up and let the market decides how much the yuan is worth. The IMF already said that much. Trump on the other hand wants to manipulate the dollar lower. Who is the currency manipulator?

  21. USA and CHINA are both SHADY countries…
    They will do everything in there power to destabilise other countries for there own gains…

  22. In the meantime, Federal Reserve has refused Trump's requests for reducing the interest rate to devalue US dollar for several times and Trump condemned FRS for it on Twitter. But I didn't see any US citizen call the chair of FRS a traitor.

  23. Motive behind weakening currency is to make currency as reserve currency for emerging economies
    It is called economic rule manipulation

  24. Not necessarily. A weaker US dollar would mean that US residents cant purchase as many imported products, because these will become more expensive. This will however depend on the elasticity of imports amongst US consumers and producers. Infact a weaker US dollar might actually help to reduce the defecit on the BOP that the US has with other countries, China being a prime example. The purchasing power of the US dollar on a domestic level is ofcourse greatly dependent on inflation. A weaker dollar may cause an increase in inflation due to higher Aggregate demand (as a result of cheaper exports), but this is unlikely to have a huge impact on US consumer spending power. The Fed will use contractionary monetary and potentially fiscal policy to make sure this doesnt happen.

  25. Democrat liberal socialist push trade war woes and recession talk just doubling most economist portfolio's to include mine. Thanks for the new sailboat.

  26. if you devalue your currency your exports become cheaper ….. but on the other hand your imports get more expensive …. countries like china can benefit from it because they export more then they import ….. but countries like USA who are a big importer docent benefits from devaluing their currency

  27. I ll tell you why this ain't going to produce any positive outcome , America is not asking for fairness and they never actually cares about playing any game fairly … America is simply telling China : We will not allow you to raise to the top spot we want to bring you down by any necessary mean . How do you expect China to respond to that other than fighting tooth and nail ? America is asking the impossible and expecting conplaiance !

  28. We already knew they we’re a currency manipulators for a long time.
    But now it’s official.
    Don’t just try to turn everything into a anti-Trump message.

  29. It just like a market. If one store lower its prices on all products, other stores either follow or lose Competitiveness.
    The question is who is cheating while doing business, and it’s not a healthy economy.

  30. Federal reserve printing dollars out of thin air, and Trump is angry that china is manipulating currency.

  31. World stage: everybody wants a weaker currency but not everybody can have weaker currency
    Argentina: challenge accepted

  32. Ah humans… we created a “god” made of paper. We religiously follow these guidelines. Yet, something from the universe can take us all out in a heartbeat. SMH… asteroid.. do your thing.

  33. Trump is a master deal maker when he can bully the other guy. China can't be bullied and Trump is to stupid to see it.

  34. cnbc tried to mislead you america and the other liberal media outlets didn't do their due diligence and investigate a report before they re-reported a fraudulent story. this appears to be intended to mislead liberals and conservatives alike. their article intentionally misrepresents the white house and the nwc

    they reported that the national weather service had to correct the president

    they lied

    here is the presidents tweet

    trumps tweet is time stamped as being 9:51 am

    here is the national weather service tweet

    the nwc tweet was 8:11 am. 1 hour and 40 minutes before, so you see no possible way that it could have been intended as a correction.. the article is bogus, the rest of the liberal articles are referring to that one.

    so you have to ask yourself did these all these media outlets forget to fact check the article before they reported on it? or did they intentionally jump on the band wagon knowing that it was a lie. ?

    you decide.

  35. If China stops buying US debt instruments, the dollar will fall and the Yuan will strengthen. If China sells off US debt for Yuan, the US dollar will take a major dive. WTF does the US want?

  36. America doesnt have gold to back a single dollar bill meanwhile Germany doesnt let Romania be nr 1 in monetary power with all the gold the world never has

  37. Why First World countries busy with trade wars? China vs. USA and Japan vs. Korea. Developing countries can't relate.

  38. China will lose in trade, economic currency war with China and will start military confrontation. …
    China will lost 3/4 of its population when war breakdown.

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