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  • The trade war took a dangerous turn and is now morphing into what many are

  • calling a currency war.

  • It's all out economic warfare between the two biggest economies in the

  • world.

  • U.S. and China.

  • Two key developments took us here.

  • The Chinese currency weakened passed a significant level that investors

  • were thinking maybe China would defendan indication perhaps that China

  • was stepping up its fight in the trade war.

  • The U.S.,

  • in response, designated China a currency manipulator, something that the

  • U.S. Treasury hasn't done since 1994.

  • And while mostly symbolic, was seen as a big aggressive move to call China

  • out and just escalate this trade tension even farther.

  • What makes it difficult is that when you have a currency war, everybody

  • wants a weaker currency.

  • Weaker currencies help your exports stay more competitive on a world

  • stage. But not everybody can have a weaker currency.

  • So in response to the U.S.

  • and China's moves on currencies, we saw other central banks and economies

  • take action like India, Thailand and New Zealand, all surprising their

  • markets through monetary policy and all weakening their currencies.

  • If everybody races to the bottom, it can be very disruptive to markets and

  • to the global economy.

  • When the Treasury formally calls out another country for being a currency

  • manipulator. Not much happens.

  • It's largely symbolic.

  • It's a badge of dishonor.

  • It's considered embarrassing and puts that other country at the top of the

  • G-20 agenda for discussing what it's doing with its currency.

  • In practice, not much explicitly happens.

  • The Treasury engages the International Monetary Fund and China in

  • negotiations and discussions about what the currency has actually been

  • doing and how they're going to fix it.

  • However, this administration doesn't necessarily play by the same rulebook.

  • So many are worried that by designating China officially a currency

  • manipulator, President Trump could use that politically and on the world

  • stage to just impose more tariffs, other sanctions and other economic

  • punishments. Now, that's not necessarily in the Treasury rulebook for how

  • this goes.

  • But we've seen President Trump break the rules.

  • Mostly everybody wants a weaker currency.

  • There are benefits to having your currency be weak.

  • Number one, it makes your exports more competitive.

  • If you're Japan and selling Hondas and Toyotas to Americans, it gives them

  • an edge over companies like GM and Ford.

  • It also makes earnings more competitive.

  • S&P 500 earnings have gotten hit this year because the dollar's been so

  • strong.

  • Anybody that does business overseas, from Apple to Procter and Gamble to

  • the automakers to John Deere, which President Trump also called out during

  • a tweet, their earnings and their revenues get cut by that strength of the

  • dollar. They sell overseas.

  • It's less competitive.

  • They bring the money back home.

  • It's worth less.

  • We've learned this lesson so many times.

  • And that is currency wars and tensions fueled by countries trying to

  • weaken their currencies can have a very destabilizing effect on growth and

  • on stock markets.

  • It happened in 2015.

  • China made a surprise decision to let its currency weak and devalue the

  • yuan. Guess what?

  • That led the S&P 500 into a correction, 10 percent off the highs.

  • That's why as soon as we saw China let its currency weakened, it sparked

  • all sorts of concerns, not just about the escalation of the trade fight,

  • but about what's really happening beneath the surface in China.

  • When countries devalue their currencies, it leads investors to wonder, is

  • their economy suffering worse than expected?

  • Are they going to have to deal with capital flight, a scary prospect where

  • people take money out of their economy.

  • We're not talking about in a small emerging market like Turkey, where we

  • had these concerns.

  • We're talking about China, one of the biggest markets in the world and the

  • second biggest economy in the world.

  • When you have other countries stepping in, then to fight to protect their

  • economies and their currencies, it's this notion of a race to the bottom

  • on interest rates and on currencies.

  • And that is what spooked markets.

  • The fact that it's going to be unpredictable, it's going to be a source of

  • tension and ultimately it's going to kill growth because tensions put up

  • walls between countries.

  • Trade slows down.

  • Tensions emerge.

  • And that's sort of been the theme of what we've been seeing on trade and

  • now currencies in 20 19.

The trade war took a dangerous turn and is now morphing into what many are

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米中貿易戦争はいかにして通貨戦争になったか (How The US-China Trade War Turned Into A Currency War)

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    洪子雯 に公開 2021 年 01 月 14 日
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