Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Following China’s extreme devaluation of the Yuan, the U.S. Treasury Department has labeled China a “currency manipulator.” Global stocks are already taking hits and economists believe a global recession is likely.
In a swift response to China’s shocking devaluation of its currency, the U.S. Treasury Department has now designated China a currency manipulator. Both the devaluation and the currency manipulator label have further worsened the trade war between the U.S. and China especially as this designation hasn’t been used since the Bill Clinton administration.
No White Flag
A few days ago, U.S. President Donald Trump accused Chinese President Xi Jinping of going back on an agreement and then announced that there will be an additional 10% tariff on $300 billion in Chinese imports. China then announced it was halting all agricultural imports as a response to Trump’s tariff increase.
Shortly after, stock markets around the world were sent crashing down as China lets its Yuan fall to its lowest point in eleven years, dropping the currency beyond the 7 per dollar standard.
Trump has called it “a major violation which will greatly weaken China over time” and further accused China of consistently using currency manipulation to “steal our businesses and factories, hurt out jobs, depress our workers’ wages and harm our farmers’ prices.” Now, it would seem that whatever hope there was before now, that one of the countries would wave a white flag, has been completely lost.
The economic tussle between both countries has been going on for a while and as the aggression increases, Chinese investment into tech companies in the U.S. has significantly dropped. More than that, even investors that have already begun in the U.S. are starting to slowly retrace their steps in fear of these high tariffs on imports and also certain worries from the Committee of Foreign Investments. Stock markets in the U.S. are already taking a hit, along with stocks in Asia as well.
Global Markets May Recede
At the moment, there is palpable fear among businessmen, investors, and also economic analysts about the situation. There’s little to no chance that the countries will bury the hatchet anytime soon. If anything, these recent events have shown that things might be worsened and these economic analysts worry that over the next nine months, the rest of the world could easily begin to see a recession in markets.
Already, top markets around the world have been negatively affected by devaluation. Japan’s Nikkei fell by 2.3% with South Korea’s KOSPI also losing 2.1%, a level which wasn’t seen since December 2016. China’s blue-chip index and the Asia-Pacific’s MSCI lost 1% and 2.5% respectively. The impact was also felt in American and European markets as the S&P 500 and the Stock Europe 600 Index also lost 1.3% and 1.8% respectively.
The Chinese Libra
China has recently announced that it would be speeding up the process of research and development for its own cryptocurrency, the Digital Renminbi. This is probably a way to circumvent the stronghold the U.S. currently has, especially with worldwide dependence on the dollar.
A while back, a significant factor considered by most experts as a major reason for one of Bitcoin’s rallies, is the current Sino-U.S trade war. At the time, it was thought that many people looked to Bitcoin as a savior of sorts, in case the trade war worsened and the USD or CNY were affected. Now that China has decided to accelerate its own crypto, it might be a significant play to finally cut any dependence on the dollar, to its barest minimum.