The value of China’s currency has plummeted to a seven-year low against the dollar.
China’s central bank lowered the reference rate for the seventh consecutive trading day Monday, reports the South China Morning Post. The devaluation of China’s currency may fuel calls for U.S. President-elect Donald Trump to follow through on his promise to label China a “currency manipulator.”
In devaluing its currency, China protects its exports, which Trump said he will punish with tariffs as high as 45 percent.
Some scholars argue that such a move could start a trade war, noting that China would almost certainly retaliate with punitive actions of its own.
China warned Sunday that it would, in fact, retaliate and advised Trump to look at history as an example.
Shortly after President Barack Obama took office, he placed a 35 percent tariff on Chinese tires, and in response, China targeted American chicken and automotive products, a Global Times editorial noted. The state-run newspaper commented that both countries lost in that situation, demonstrating the futility of a trade war.
“If Trump imposes a 45 percent tariff on Chinese imports, China-US trade will be paralyzed,” the paper asserted, “China will take a tit-for-tat approach then. A batch of Boeing orders will be replaced by Airbus. U.S auto and iPhone sales in China will suffer a setback, and U.S soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the U.S.”
“None of the previous presidents were bold enough to launch an all-out trade war against China,” the Global Times argued. “Trump as a shrewd businessman will not be so naive…If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence and bear all the consequences.”
Concern is noticeably present in the wording of the editorial.
At the highest levels of the Chinese government, officials are already working to smooth things over with the incoming U.S. president.
“The facts prove that cooperation is the only correct choice for China and the United States,” Chinese President Xi Jinping told Trump over the phone Monday, according to Reuters.
China and the U.S. must “promote the two countries’ economic development and global economic growth” and “push for better development going forward in China-U.S. relations,” Xi further explained.
Trump reportedly told Xi the two leaders had a “clear sense of mutual respect” for one another and he “believes the two leaders will have one of the strongest relationships for both countries moving forward.”
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