Here's How China's Economic 'Nuclear Option' Would Impact US
==========
China's insatiable appetite for gold, copper, and other commodities has led to a debate over whether Beijing is gathering resources to hedge against the consequences of devaluing its currency. If Beijing invoked the 'nuclear option' and intentionally weakened the yuan (RMB), this would likely draw a fiery response from Washington, but it could also take some pressure off American consumers and impact the 2024 elections. Weakening a currency relative to others has benefits, such as boosting exports by making them cheaper. This may be tempting to China's leadership amid a manufacturing glut and low consumer confidence. But there are also notable risks to such a move, including pricier imports, higher inflation, destabilization in the market, and trade wars with nations suddenly flooded with Chinese goods that outcompete domestic industries. Low-cost, state subsidized exports are already flaring tensions between China and a number of trade partners, including the U.S. and Europe. The move would bring down the prices of myriad made-in-China products and put pressure on U.S. companies to do the same. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell would open up a bottle of Champagne as a Chinese devaluation would solve, at least temporarily, their inflation problem just in time for the election. Inflation is viewed as a major issue in the lead-up to the presidential election, with a strong majority of Americans listing it as important. China's rapid accumulation of gold and other commodities has led to speculation that the country is poised to devalue its currency. The move would likely result in a strongly worded statement from the U.S. Secretary of Commerce about the trade deficit, currency manipulation, and protecting American jobs from unfair competition from China. The issue led the Fed to postpone cutting interest rates until it had greater confidence price growth was slowing. Polling shows that a majority of Americans trust Trump more than Biden in handling inflation. Retaliatory tariffs against China may be discussed, but unlikely to be implemented before the election.
#China #Us #Economy #CurrencyDevaluation #Exports #Inflation #TradeWars #PresidentialElection
https://www.newsweek.com/how-china-economic-nuclear-option-would-impact-us-1898488
Newsweek /
npub1ka…2agq5
2024-05-09 08:55:56
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npub1ka5jtasfg8rfe47ypj4x0a2d70fvaksu0u9z9rku70yc8hmjmu9sz2agq5Published at
2024-05-09 08:55:56Event JSON
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"content": "Here's How China's Economic 'Nuclear Option' Would Impact US\n==========\n\nChina's insatiable appetite for gold, copper, and other commodities has led to a debate over whether Beijing is gathering resources to hedge against the consequences of devaluing its currency. If Beijing invoked the 'nuclear option' and intentionally weakened the yuan (RMB), this would likely draw a fiery response from Washington, but it could also take some pressure off American consumers and impact the 2024 elections. Weakening a currency relative to others has benefits, such as boosting exports by making them cheaper. This may be tempting to China's leadership amid a manufacturing glut and low consumer confidence. But there are also notable risks to such a move, including pricier imports, higher inflation, destabilization in the market, and trade wars with nations suddenly flooded with Chinese goods that outcompete domestic industries. Low-cost, state subsidized exports are already flaring tensions between China and a number of trade partners, including the U.S. and Europe. The move would bring down the prices of myriad made-in-China products and put pressure on U.S. companies to do the same. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell would open up a bottle of Champagne as a Chinese devaluation would solve, at least temporarily, their inflation problem just in time for the election. Inflation is viewed as a major issue in the lead-up to the presidential election, with a strong majority of Americans listing it as important. China's rapid accumulation of gold and other commodities has led to speculation that the country is poised to devalue its currency. The move would likely result in a strongly worded statement from the U.S. Secretary of Commerce about the trade deficit, currency manipulation, and protecting American jobs from unfair competition from China. The issue led the Fed to postpone cutting interest rates until it had greater confidence price growth was slowing. Polling shows that a majority of Americans trust Trump more than Biden in handling inflation. Retaliatory tariffs against China may be discussed, but unlikely to be implemented before the election.\n\n#China #Us #Economy #CurrencyDevaluation #Exports #Inflation #TradeWars #PresidentialElection\n\nhttps://www.newsweek.com/how-china-economic-nuclear-option-would-impact-us-1898488",
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