US mulling China tariff hike amid ‘currency manipulation’ accusations

US mulling China tariff hike amid ‘currency manipulation’ accusations

06/08/19

US-China trade tensions are escalating sharply, with analysts warning of a drift towards a currency war following the weakening of the RMB this week.

The RMB slid to its lowest value since the 2008 global financial crisis, to more than 7 per US dollar, prompting accusations that China is manipulating its currency to mitigate the impact of US tariffs.

For the first time in 25 years, the US Treasury accused China of being ‘a currency manipulator’ – prompting fierce pushback form Chinese state media. The state-owned People’s Daily accused Washington of ‘deliberately destroying international order’ in a bellicose editorial.

According to analysis published in the Financial Times, ‘the devaluation is mainly for signalling purposes and doesn’t represent a fundamental part of Beijing’s strategy to adjust to Trump’s trade war.’ However, analysis by Citi Research predicts that the US will increase the recently-announced 10 per cent tariffs on US$300 billion of Chinese goods to 25 per cent as a result of the RMB’s devaluation.

CNBC have put together a useful guide on the latest developments, here.

The ongoing US-China trade tensions will be central to the upcoming Asia House Global Trade Dialogue, taking place in Singapore on 7 November. Find out more.