As everyone knows by now, after the market closed on Monday, the US Treasury unexpectedly named China a currency manipulator, which naturally will be viewed as an escalation of the trade war and exacerbate the market sell-off, even if the PBOC briefly limited the selloff overnight by fixing the yuan slightly higher than expected.
A year of negotiations followed by the relatively modest sanctions listed above may work politically for the US administration if it is unable to cut a trade deal with China in the coming months.
In market terms, the designation, however meretricious, will likely be seen as a further ramping up of the trade dispute and possibly leading to some reaction by China.
Naming China a manipulator, given the absence of teeth to the law, should have less substantive impact on activity and asset markets than a tariff increase, but it will likely add to asset market pressures in the short term and pressure the Fed on additional easing.
The US Treasury has designated China a "Currency manipulator" under section 3004 of the Omnibus Trade and Competitiveness Act of 1988.
The Treasury last used the currency manipulator designation 25 years ago.
While the move represents a symbolic escalation of the trade conflict, as a practical matter we do not expect it to have major consequences on its own.
https://www.zerohedge.com/news/2019-08-06/what-are-consequences-being-named-currency-manipulator
A year of negotiations followed by the relatively modest sanctions listed above may work politically for the US administration if it is unable to cut a trade deal with China in the coming months.
In market terms, the designation, however meretricious, will likely be seen as a further ramping up of the trade dispute and possibly leading to some reaction by China.
Naming China a manipulator, given the absence of teeth to the law, should have less substantive impact on activity and asset markets than a tariff increase, but it will likely add to asset market pressures in the short term and pressure the Fed on additional easing.
The US Treasury has designated China a "Currency manipulator" under section 3004 of the Omnibus Trade and Competitiveness Act of 1988.
The Treasury last used the currency manipulator designation 25 years ago.
While the move represents a symbolic escalation of the trade conflict, as a practical matter we do not expect it to have major consequences on its own.
https://www.zerohedge.com/news/2019-08-06/what-are-consequences-being-named-currency-manipulator
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