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Chinese Currency As A Tariff Countermeasure?

By Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

Lots of voices have accused China of manipulating the Yuan for commercial advantage over a number of years. It has been a perennial talking point in the USA, but for the US authorities to declare that China is manipulating its currency, there would be a designated course of action to be followed (domestically) and many in business feel that the move would be counterproductive.

If you follow currencies, it is evident that the Chinese currency tracks the Dollar. But it was also clear that the Yuan had been slowly depreciating against the Dollar also: 6.2080 (Jan 15); 6.5125 (Jan 16); 6.9207 (Jan 17); and 6.4887 (Jan 19). In the early months of 2018, the Yuan strengthened to a high of 6.2746 Yuan to the Dollar (Mar 2018), but has steadily weakened since then with the announcement of US tariffs on Chinese products. Last week, the same Dollar buys you 6.8773 Yuan – representing a rise of almost 10% in the value of the Dollar relative to the Yuan. This has the effect of offsetting part of the tariffs raised on Chinese goods. Of course, the Chinese have retaliated by putting tariffs on some American produce which is amplified in the domestic market by the weaker value of the Yuan.

President Trump made much of the manipulation of the Chinese currency during his election campaign, but in office has not pushed for China to be labelled by the USA as a currency manipulator. The tariffs started to come into effect in May and were designed to make Chinese goods less attractive in the American market, thereby (he hopes) leading consumers to turn to nationally produced alternatives. Mr Trump has repeated his claims about China in an interview with Reuters news agency and suggested that he was pessimistic that on-going Sino-American trade talks will bear fruit. He said the US was ready for a lengthy trade war with China.

Dr. Mike Campbell
About Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.
 

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