China Allows Currency to Drop – President Trump Responds – Devaluation Lowers Consumer Import Prices…

China needs to buy dollars to backstop their own currency (¥uan). When China trades with the U.S. they hold the return dollars as a peg against their weak currency.  Remove the flow of dollars (lessen exports) and they start to run out of strong pegged currency.

What is happening today is not as much direct devaluation by China; rather they are intentionally allowing their currency to drop in value, in an effort to lower export prices and off-set any tariffs from the U.S.   Simultaneously, Beijing is spending internally, burning cash, to keep their economy from weakening.  Their Yuan burn rate is greater than the influx of higher valued dollars needed to hold their position.

They cannot keep this position indefinitely.

First, here’s a solid interview with former CEO Gerald Storch on how the currency devaluation leads to lower prices for U.S. consumers.  Again, emphasizing the point that U.S. consumers are not paying for the tariffs against China.  Watch:

President Trump responds to the current activity by China:

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Beijing says they will keep lowering the value of their currency to keep the flow of cheap Chinese manufactured goods flowing to the United States, regardless of tariffs.  Simultaneously they need the returning higher valued dollars to prop-up their own diminishing currency.

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Hang on folks…. this is going to continue:

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This entry was posted in Auto Sector, Big Government, China, Communist, Donald Trump, Economy, Election 2020, energy, Hong Kong, Japan, media bias, President Trump, Trade Deal, Uncategorized, US dept of agriculture, US Treasury, USA. Bookmark the permalink.

202 Responses to China Allows Currency to Drop – President Trump Responds – Devaluation Lowers Consumer Import Prices…

  1. INTERNATIONAL TRADE IMPLICATIONS:

    China’s manufacturing competitors must MATCH or BEAT China by devaluing THEIR currencies or cutting prices-and-profits.

    The combination will eviscerate EU Manufacturing … unless the EU
    • MATCHES China’s actions or
    • FOLLOWS President Trump’s Tariffs on Chinese Exports or
    • BLOCKS Imports from China … including Tariff-Evading Trans-Shipments through third countries.

    Liked by 7 people

  2. Actually, Geoffgo, Abraham Lincoln imposed the first federal income tax in 1861, by signing the “Revenue Act.” The courts eventually ruled it unconstitutional, which is why a Constitutional Amendment was required before the Progressives could bring back an income tax in 1913 . . . though whether even the current income tax is constitutional AS COLLECTED remains an interesting question, given that the Constitution still stipulates federal internal taxes must be either direct taxes capitated, or else indirect excises. — V.S.

    Liked by 2 people

  3. Woogumz says:

    “…The threat to food availability and security from Chinese pig Ebola and fall armyworm will prevent China from aggressively using tariffs as an offensive weapon against the U.S. over the coming year. Just as the poor structure of China’s leveraged economy necessitates that they return to the negotiating table with the U.S. ⁠— the largest buyer of its goods ⁠— food insecurity in China will oblige them to put aside their main retaliatory tool and start earnestly negotiating with the U.S.”

    >>China was already in a severe “protein deficit” BEFORE the Asian Swine Flu/Pig Ebola crisis. The Chinese govt has been subsidizing the price of pork internally to avoid price pressures, but they can not keep subsidizing pork prices indefinitely. China is facing a major food crisis.

    I don’t know how to embed graphics, but there is an interesting graph showing the spread of Asian Swine Flu/Pig Ebola in the FAO article linked below. It has already spread from other Asian countries like Vietnam to Central Europe. Bulgaria is in a crisis. The British Veterinary service feels that the Chinese pig crisis may be “at the point of no return” due to massive losses of sows/breeding stock.

    http://www.fao.org/ag/againfo/programmes/en/empres/ASF/Situation_update.html
    https://dailycaller.com/2019/06/26/chinese-pig-ebola-trump-trade-leverage-china/

    Like

    • TarsTarkas says:

      I fervently hope the CDC is working on a vaccine as we speak . . .

      The damn virus may already be here. Just one morsel of undercooked pork into a piggery’s feedstock and no more ‘the other white meat’ for perhaps years to come.

      Like

  4. meadowlarkspring says:

    Way back when Pres. Trump knew he had to run and win. He knows what he’s doing. Today was a big day for our country.

    China Just Overtook The US As The World’s Largest Economy
    Mike Bird
    Oct. 8, 2014
    https://www.businessinsider.com/china-overtakes-us-as-worlds-largest-economy-2014-10

    -snip-

    So the IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right about now and becoming the world’s biggest economy.

    -snip-

    Liked by 3 people

  5. Arrest Soros says:

    For those wondering how this trade “war” might pan out, consider the following.

    China has more millionaires than any other country and is producing more new millionaires every year than any other country.
    Millionaires and billionaires are powerful people. Now put yourself in their shoes.
    You have assets totalling (say) 60 million Yuan, which is worth 10 million US dollars.
    In a global economy, where most of your purchases are foreign assets and foreign goods (jewellery, art, cars, foreign stocks) the value of your domestic currency is very important.
    If the value of the Yuan drops by 10%, you no longer have US$10 million, you have only US$9 million. You’ve just been made less rich.

    So now you have two options. Get as much of your money out of China as quickly as possible (if the Chinese government lets you, doubtful) or you use your domestic influence (however subtly) to pressure your government to find a solution to end this war.

    There are hundreds of people in the Chinese politburo and they are ALL millionaires. They are ALL losing money on a daily basis. Then there are very powerful Billionaires (that’s a B) like Jack Ma, Pony Ma and Gong Hogjia. These people have influence and they will use it to put a stop to this trade war.

    Xi is cornered to a great extent.

    Liked by 4 people

    • Bigbadmike says:

      10 Million is chump change. That’s not enough money to move to another Country and live large like the neveau riche Chinese millionaires want to and pay for their families education, lifestyle, and elite expectations. Let me State a simple fact:. Since Donald Trump became President, U.S Manufacturers have led the World in new Machine Tool purchases. For the First time in over 20 Years. We’re a lean, mean, fighting machine. And no other Country can match our Productivity, Quality, Value, and Economy. More and more Companies have realized that U.S. made products are better, more affordable, longer lasting, and provide a greater ROI, (Return on Investment). We’re making a lot of money and we’re putting that money right back into our facilities, our employees, and our equipment. Try and compete with us and get ready for an ass whooping. You’re wasting your time.

      Liked by 2 people

      • Arrest Soros says:

        Oh brother.
        LOOK at what I wrote, specifically that bit in brackets… (say)… which means I was using a simplified example.
        I also mentioned those who have just a tiny bit more than “chump change” further down my comment.
        As for the rest of your rant about the prowess of US manufacturing and innovation, that has nothing to do with the point of my comment which was about the internal political dynamics in China.
        Have a look at my twitter bio @co2isfood and see what I think of America and Americans. You’re preaching to the converted.
        Unbelievable.

        Liked by 1 person

  6. Elle says:

    It is just a matter of time before the powers that be in China realize that XI is not handling things well. Not sure how that plays out. Since this started, I’ve been seeing a lot more stuff that is obviously from India when I shop as well as some other cool and unusual stuff that seems to be from new distribution channels. Once those distribution networks get established, they are almost impossible to shut down. If you make them illegal, they just move to black market.

    Like

  7. Robster says:

    Yeah well, Washington is spending internally, burning cash, to keep it’s economy from weakening also….add to that lower interest rates and more quantitative easing (ramping up the $ printing presses) the dollar will likely fall and consumer price inflation the result.

    Like

  8. Conservative_302 says:

    I am in the the long haul. I don’t need to buy so much crap anyways. Great picture of the eagle reigning over the dragon.

    Like

  9. Rob says:

    So far, so good, President Trump. Don’t get discouraged, China is just flapping their arms trying to stay above water. Keep the pressure on, announce the next set of tariffs and the date, after this one coming up. The threat is almost as good as actually doing it. Watch them squirm. I would rather not see their cheap junk on the shelves anyway, we need to buy American.

    Like

  10. George Barnett says:

    The amount of tariffs on China but absorbed into the USA economy is chump change; but tariffs represent a major portion of China’s hard currency income. China’s exports to the USA is about 4% of its GDP – massive. China imports food stuffs and animal feeds from the USA, stuff China can not grow; plus sophisticated machinery and the like that China cannot manufacture. China cannot feed its population on its own, nor sustain a sophisticated export manufacturing economy without USA machinery imports. Soybeans are instructive. The only other major exporter is Brazil, and the growing, harvesting and exporting of soybeans cannot be jump-started to displace USA exports – should China choose to not buy American farm products. There is nothing, including iPhones, that cannot be assembled anywhere else – including in the USA by robotics instead of exploiting Chinese workers $100 a week. Here’s a shocker number! The accumulated US trade deficit over the past quarter century (mostly from China) is about $40 trillion – about two year’s of USA GDP. That’s near $350,000 for every American family. The Chinese Communist Party thanks you from the bottom of their spiritless heart!

    Like

  11. Pegon Zellschmidt says:

    “Again, emphasizing the point that U.S. consumers are not paying for the tariffs against China.” Well, Shep Smith, Leland Vittert and Arthel Neville, all of Faux News beg to differ; rabidly and spittlely beg to differ.😡

    Like

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