Tuesday, August 13, 2019
China has upped the ante in its trade dispute with the United States. By allowing the yuan to fall on foreign exchange markets, Beijing has shown how far it will go in response to existing U.S. tariffs on Chinese goods, as well as additional ones now threatened by President Trump. (Today, the White House announced that these new tariffs would go forward as expected on September 1 but delayed levies on certain products, including electronics, until December.) But China’s moves, bold and headline-grabbing as they are, also signal weakness: Beijing can no longer play the tit-for-tat tariff game with which it once engaged the Trump White House. And because the devaluation has raised the risk of capital flight from China (and with it, longer-term economic difficulties), the currency move also hints at desperation to find immediate relief from the economic pain that the tariffs are inflicting.