It was but just yesterday when the stock market took a major dive and at one point was 900 points in the hole. News of China’s currency manipulation really struck a chord with American investors. They hate the trade war more than anything. What should have been good news for the US when it came to cutting interest rates, the stock market went down instead of up.
That’s because president Trump has announced even stronger tariffs $350 billion worth of Chinese goods. Is no doubt that the trade war hurts our economy, but the president is out for blood. He’s tired of the Chinese manipulating the currency. He’s tired of how they steal intellectual rights and technology.
As a result of yesterday’s events, now the Treasury Department has weighed in and also called China a currency manipulator. They took action to lower the value of their yuan, which makes Chinese products much cheaper in the foreign market. This means that more countries are able to trade with China because goods aren’t as expensive as they would be trading with the United States.
This essentially gives China an “unfair advantage,” forcing the International Monetary Fund and the Treasury Department to look for ways to counter this move by the world’s #2 economy. This is the first time Trump has made comments about another country’s manipulation of their currency. In fact, he accused the EU of doing the same. They deflate their currency while the value of the dollar remains really strong.
What a Strong Dollar Means
You might think having a strong dollar is a good thing. Yet, there’s a reason why other countries are devaluing their currency. Having a strong currency is not a good thing for trade. Consider exchange rates and how they would play a part in a country buying goods from another. If a country has a strong dollar like the US currently does, and your currency is weak, who would other countries rather trade with?
Surely, they would rather trade with someone currency is weak because that means they get the same products for much cheaper. This is the type of game that China’s playing. As the US increases the amount of tariffs that they place on China, their figuring out ways of getting around it by lowering the value of the yuan.
“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with the USA,” President Trump wrote on Twitter. “We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!”
“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”
Benefits of Weakening the Dollar
The value of the dollar impacts so many things here in America. If the US dollar is weakened, that means more countries can buy more U.S. goods. When we have that open trade relationship with other countries and their buying up all of our stuff, that gives a boost to many industries in our country.
They like to buy agriculture which is great for farmers. They’ll buy our cars and steel, giving a boost to manufacturers and factory workers. But when other countries manipulate their currency, it gives them an unfair advantage and takes jobs away from American workers. Trump has been displeased throughout his own presidency with the high value of the dollar.
“I want a strong dollar, but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” Trump said during a speech in March, before launching into criticism of Fed Chairman Jerome Powell. “We have a gentleman that likes a very strong dollar in the Fed,” he added, referring to Powell.
