“As Donald Trump continues to escalate his slap-happy approach to tariffs on Chinese goods, China is running out of US goods on which to to levy duties in retaliation. But if China wants to keep going tit-for-tat, it has other options.
“Unlike the US government, the People’s Bank of China—China’s government-run central bank—directly manages the value of its currency. The Chinese government let the yuan weaken around 4% against the US dollar in the last month, among the sharpest one-month drops in value in its history. The yuan’s slide has sparked fears that China could “turn a trade war into a currency war,” as Brad Setser, economist at the Council on Foreign Relations, phrased it.”
“If antagonizing Trump is the goal, depreciation has double-whammy appeal. Since it makes China’s exports cheaper—and therefore more competitive against US manufacturers—allowing the yuan to weaken will soften the blow of Trump’s tariffs on the Chinese economy, all other things being equal, and possibly eliminate the impact altogether. Conversely, it will also make the American products China buys more expensive, reinforcing the effects of China’s tariffs on US-made goods.”
https://qz.com/1329777/the-us-china-trade-war-could-turn-into-a-currency-war-next/
“China’s currency hit lows not seen since last July, and the gap between onshore and offshore rates widened, suggesting greater pessimism among foreign traders.”
https://www.wsj.com/articles/chinas-yuan-hits-one-year-low-1531987043
“China this month recorded one of its biggest corporate-debt defaults yet, with the downfall of a coal miner that had ridden the country’s wave of credit until policy makers changed the game with their deleveraging campaign…. How the borrower ran up a 72.2 billion yuan ($10.8 billion) tab that it now can’t make good on illustrates why this year will be China’s worst yet for corporate defaults. And with a potential lifeline from state-owned banks unveiled Wednesday, it could also emerge as an example of China’s unwillingness to allow unbridled corporate failures.”
“Japanese business sentiment slipped in July, a Reuters poll found, reflecting companies’ fear of fallout from an intensifying trade dispute between the United States and China… In the poll of 483 large- and mid-sized companies, many respondents expressed concerns about protectionism, high energy and materials costs squeezing profits, and labor shortages that raised hiring costs. Some 268 firms responded on the condition of anonymity.”
“Tumbling out of the European Union without a deal in hand could cost the pound dearly. Sterling could slump as much as 8 percent against the dollar if the UK doesn’t clinch a deal with the EU by March 29, when the nation is slated to leave the bloc, according to a survey of analysts.”
“The cost of filling up a typical family car [in the UK] with 55 litres of unleaded rose by £6.98 to £70.40 between June last year and June this year. The cost of filling up with diesel jumped by £8.14 to £72.66.”
“Demand for retail space in London has dived as woes around high street closures grow, according to a highly-regarded survey out today. Roughly 68 per cent more chartered surveyors in London’s retail sector noted a quarterly fall, rather than a rise, in demand for space in the capital, reaching levels not seen since 2008.”
http://www.cityam.com/289397/demand-london-retail-space-slumps-closures-mount-up
““We are reasonably confident that the ECB will raise rates before the next downturn, but the risk of this not happening has clearly risen with the accelerating trade war, which has come amidst signs of slowing growth momentum,” said Elwin de Groot, head of macro strategy at Rabobank.”
“The most remarkable member in Erdogan’s new Cabinet is his son-in-law, Berat Albayrak, who took the reins of the economy at a time of serious financial woes. Erdogan chose to sideline Mehmet Simsek, the hitherto czar of the economy who enjoyed credibility among local and foreign investors; he then attached the Treasury to the Finance Ministry and handed the portfolio to Albayrak… Economic actors have remained reluctant to put their money in the Turkish lira, bring in funds to Turkey or make investments. As a result, the depreciation of the currency has continued.”
