China Just Made Trump Look Like the Biggest Loser. Filipina Dating Website: ❤️
President Trump's Trade War on China, Backfired Monday. It Sent Wall Street into an Apoplectic Fit.
Basically, China's central bank adjusted the value of its currency down to its lowest point in over a decade.
And immediately, smart Investors, fearing President Trump will respond with another tariff escalation,
showed their displeasure by fleeing stocks for the safety of bonds and Treasuries. Which caused the S&P 500 and the Nasdaq to fall 3 percent and 3.5 percent, respectively, by the end of the day.
But the elephant in the room is undoubtedly the low value of the Chinese Yuan versus the U.S. dollar.
Unless you've been living under a rock, this last year, you'll be fully aware that, Trump is relying on tariffs to carry out his trade war.
Which he confidently promised would be: "Lots of Fun and Very Easy to Win..." The goal is to pressure China into accepting various reforms. But, so far, China hasn't shown any intention whatsoever of coming to the party.
And so, Trump's tariff threats keep getting Bigger and BIGGER.
He's already imposed 25 percent tariffs on $250 Billion worth of Chinese exports to the U.S.
And last week, he threatened a 10 percent tariff on ANOTHER $300 billion worth, which would basically make every last dollar of Chinese exports subject to U.S. duties...
Now, before we go much further, there's a few FACTS we all need to be aware of, when it comes to tariffs and trade wars...
FACT #1. China DOESN'T Pay the Tariffs... American business owners and consumers do. If you think otherwise, you simply don't even 'remotely understand' how Tariffs work...
FACT #2. In a Trade War, Size 'Really' Matters... China's foreign exchange reserves increased by $18.23 Billion to $3.119 TRILLION in June 2019. China's gold reserves rose to $87.27 Billion at the end of June.
In Stark Contrast to China, U.S. foreign exchange reserves totaled ONLY $126 Billion, as of Feb. 2019.
Stop and let that sink in for a moment... China Has Over 3 TRILLION Dollars in Foreign Exchange Reserves. In Comparison, the US Has a Measly $126 Billion.
Foreign exchange reserves are one of the most important aspects of any country's monetary policy. When it comes to international money transfer.
As you might've guessed from the name, foreign exchange reserves are a store of foreign currency assets held by a country’s central bank.
Major reserve currencies Are: The United States dollar. The Euro. The Dutch guilder. The Pound sterling. The Japanese yen. The Swiss franc. The Canadian dollar. And the Chinese yuan. What Do Foreign Exchange Reserves Actually Do..?
They've got two main functions:
1. Providing Security. And 2. Influencing Exchange Rates.
Countries usually buy commodities like oil in foreign reserve currency because it helps protect them from rate volatility.
That's why the IMF recommends central banks hold enough to cover 100% of short-term debt, or the equivalent of three months' worth of imports.
In the second, the central bank buys domestic currency using the foreign reserve.
That raises demand, which bumps up the price. It can be a useful tactic to fall back on when a country's currency is falling fast in value.
FACT #3. The Reduction in China's Currency Largely Neutralizes the Pain of Trump's Tariffs... The whole end goal behind Trump imposing his tariffs in the first place, was to raise the cost of Chinese exports to both business and domestic markets in the U.S.
Ultra simplistic thinking was, that Americans would immediately start buying less goods from China.
But... and here's the irony, a fall in the value of China's currency lowers the cost of those exports for Americans, thus effectively offsetting the Trump tariffs' effect.
In fact, the People's Bank of China explicitly stated that the new, lower value target was retaliation for the "unilateralism and trade protectionism measures and the imposition of increased tariffs on China."
It's called 'Quantitative Easing' which is a fancy way of saying: "Hey, Let's Print More Money! And Flood the Market With It..." And every time they print more and more money, the actual buying power of the dollar is weakened.
FACT #4. Trade Wars Are 'Anything But 'Fun and Very Easy' to Win...
Don't believe me? Just look at the US Soybean industry. Tariffs have ‘completely devastated’ the industry. China simply switched to buying soybeans elsewhere... And an entire industry worth nearly 50 Billion Dollars has been all but wiped out.
FACT#5. China Has a 'President for Life' with Trillions of Dollars to Spend. And Countries all over the world wanting to do business with them...
In Other Words, China can EASILY Ride Out the Trade War, Until Trump Either Folds Or Is Gone. If He folds, watch for him to blame everything on the Fed.
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