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China’s Yuan Fixes Through 7 For First Time Since 2008, While July Trade Data Tops Estimates

Paradoxically, this could serve as something of a pressure valve.

Paradoxically, this could serve as something of a pressure valve.
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2 comments on “China’s Yuan Fixes Through 7 For First Time Since 2008, While July Trade Data Tops Estimates

  1. Fixing above 7 is significant because it defies the “currency manipulator” threat, and because each 0.1 step is now just incremental and hence easier.

  2. I may just be dense here, but I don’t understand the theory that you need a 30% devaluation to make up for a 10% tariff. For starters, if the tariff increases prices by 10% and the devaluation cuts that price by 10%, shouldn’t demand from the nation imposing the tariff remain unchanged? Second, China trades with more than just the US. So if the 10% yuan devaluation against the dollar also results in some devaluation against other currencies of nations that are not imposing a tariff, doesn’t that increase demand and provide a stimulus?? For example, if the yuan falls 5% against the euro, and the EU imposes no additional tariffs, wouldn’t we expect demand for Chinese goods from the EU to rise, resulting in a stimulus?? To me, that would suggest that China could stay even on demand with less than a 10% devaluation, not more than one.
    Perhaps the piece I’m missing is value add in manufacturing?? For example, China imports raw material and then manufactures something, adding value of 50%. But then the tariff is imposed on total value, not just value add. So the 10% tariff is really a 30% tariff?
    Or is it something else? I don’t get it.

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