Connect with us

Popular World News

China Hits Back at Trump With Weaker Yuan, Halt on Crop Imports By Bloomberg

China Hits Back at Trump With Weaker Yuan, Halt on Crop Imports By Bloomberg


China Hits Back at Trump With Weaker Yuan, Halt on Crop Imports By Bloomberg


(Bloomberg) — After trying to placate Donald Trump for more than a year only to face tariffs on virtually all its shipments to the U.S., China is signalling it’s ready to play hardball.

In a stark escalation of the trade war that has roiled financial markets and weighed on economic growth worldwide, Beijing allowed the yuan to tumble to its weakest level in a decade against the dollar and asked state-owned companies to suspend imports of U.S. agricultural products.

The moves emerged within days of Trump’s threat to impose additional tariffs on China and struck at the heart of two of the U.S. president’s fiercest criticisms — that Beijing manages its currency unfairly to help exporters and has failed to keep promises to boost purchases of U.S. crops after a trade truce in June. Investors responded by dumping Asian stocks and currencies in favor of haven assets including the Japanese yen, U.S. Treasuries and gold.

“It’s among the worst-case scenarios,” said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “First markets sell off, then Trump wakes up and this all gets far, far worse.”

Trump last week proposed adding 10% tariffs on another $300 billion in Chinese imports from Sept. 1, ramping up the trade war between the world’s largest economies shortly after the two sides restarted talks. Bureaucrats in Beijing were stunned by Trump’s announcement, according to Chinese officials who’ve been involved in the trade talks, and Beijing has pledged to respond if the U.S. insists on adding the extra tariffs.

Market Turmoil

The MSCI Asia Pacific Index headed for its biggest decline since March on Monday, with shares slumping more than 2% in markets from Tokyo to Hong Kong and Seoul. Equities in Shanghai saw a more modest drop amid speculation that state-linked funds may act to prop up the market.

The yuan tumbled 1.2% to 7.0275 a dollar at 12:16 p.m. after the People’s Bank of China set its daily reference rate at a weaker level than 6.9 for the first time since December. The sank as much as 1.9% to a record low.

“Breaking seven is due to a mix of factors: an escalation of trade war, the softening of China’s economy and a willingness for the PBOC to tolerate higher volatility for the yuan,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “The PBOC has entered uncharted waters, so it has to manage expectation carefully.”

The central bank attributed the yuan move to protectionism while saying it can still maintain a steady currency. The yuan continues to be stable and strong against a basket of currencies, the central bank said in a statement, adding it’ll continue to create new tools for any necessary measures in response to the “positive feedback” loop in the yuan market.

Corn and soybean futures fell after Bloomberg News reported that China’s state-run agricultural firms have stopped buying American farm goods, and are waiting to see how trade talks progress.

Trump has repeatedly complained that China hasn’t made the “large quantities” of agricultural purchases that he claims President Xi Jinping promised when they met in Osaka at the G-20 summit. China’s commerce ministry didn’t respond to a fax seeking comment.

“China is giving up on its softer diplomatic strategy and is no longer willing to be Trump’s punching bag,” said Chua Hak Bin, an economist at Maybank Kim Eng Research Pte. “Trump’s tariffs threats are backfiring and triggering a full-scale trade war.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.


Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!