The Yuan devalued over 1% against the US Dollar during early Monday trading, the sharpest drop for the Chinese currency, since the 2008 financial crisis, with one Dollar now worth more than 7 Yuan. According to some observers, this is the result of an increase in trade tensions, following the imposition of new tariffs on 300 billion worth of Chinese imports, by Washington and the subsequent promise by the Chinese authorities to retaliate.
The devaluation will in some way mitigate the effect of the new tariffs over the price American consumers will pay for imported Chinese goods; however, adding a new currency front to the ongoing trade conflict, between the world’s two economic superpowers, is likely to increase tensions even more, potentially hampering the growth of the global economy. It Is therefore reasonable to look at the latest developments as a warning from China, and not as an all-out retaliatory movement.
Photo by Erwan Hesry.
