Trade war between Washington and Beijing getting worst – Westpac

Sean Callow, an analyst at Westpac, thinks that the threat of the U.S. President Donald Trump to impose 10% tariffs on the $300bn of U.S. goods imports from China that are not currently taxed was not well received in Beijing.

“Given that the tariffs would not apply until 1 September, there was an initial glimmer of hope that China might not retaliate quickly.

Instead, as well as verbal defiance from Chinese officials, Monday brought the long-awaited break of USD/CNY 7.00, the yuan’s weakest levels since May 2008. China’s central bank chose to explain this move, attributing it to the “impact of unilateralism and trade protectionism, as well as the expectation of additional tariffs against China.

Concern over deteriorating US-China trade relations was amplified less than 24 hours later, as a series of US presidential tweets alleging FX manipulation by China culminated in US Treasury formally designating China as a currency manipulator.

This was the first such label by the US since 1994 and came despite China not even coming close to meeting Treasury’s own criteria in its May FX report.”