China Has Quietly Implemented A 6% Across The Board 'Tariff' On All US Imports

Trump and Xi have spent much of the last few weeks tossing tariff grenades across the Pacific Ocean as retaliatory retaliations grow ever stronger in rhetoric and potential escalations.

Then this week, Trump seemed to back away from his most serious threats (direct Chinese investment restrictions).

We wonder if this is why...

Since Trump started to rattle his trade war sabre, the last three months have seen the offshore Chinese Yuan tumble over 6% (crashing almost 4% in the last two weeks alone)...

Nothing happens by accident in China and this massive drop in the value of the Yuan mirrors the violent devaluation, snap in 2015...

All of which suddenly makes US imports to China 6% more expensive than they were in Q1 - a stealth tariff that no one is talking about.

And before this is dismissed as just the mirror of USD strength, we suggest the following chart shows very clearly the PBOC allowing the Yuan to weaken notably against just the dollar while - until the last few days - maintaining Yuan's buying power against the rest of the world.

However, as Capital Economics points out, if the PBOC is using the exchange rate to fight back against the US, it is pulling its punches: the PBOC’s daily reference exchange rate has in the past few days been stronger than market rates might have suggested, not weaker.

It is of course still notable that the PBOC has done relatively little to stand in the way of the currency slide, even if it isn’t directly responsible for it. It always argues that the exchange rate is driven by market forces.

But its tolerance will probably only go so far, given the painful experiences of 2015 and 2016: any benefit to exporters would be swamped if depreciation triggered economic and financial instability.

Still, as a wise market participant noted, while all the bellicose language is coming from Trump, perhaps the biggest factor right now is that Beijing has "weaponized" the Yuan...

Comments

HopefulCynical Four Star Wed, 06/27/2018 - 22:05 Permalink

China is an EXPORT economy. The US is still the world's biggest consumer economy.

Yes, yes, blah blah blah muh metals - but understand. America can survive without Chinese crap a lot longer than China can survive without America buying said crap.

Trump should respond with an across-the-board 20% tariff on ALL Chinese goods, on TOP of any existing or planned tariffs. Orientals respect one thing only: raw power, giant brass balls. If Trump doesn't flinch, they WILL back down.

They need us more, pure and simple.

In reply to by Four Star

Pinto Currency arby63 Wed, 06/27/2018 - 22:35 Permalink

 

This is not PBOC deval but beginning of a panic to secure USD as cutting trade deficits starts to cut USD liquidity.

The Chinese banks are borrowing USD short in the inter-bank market and lending USD long.

Problem when USD climbs vs. all currencies and rates rise as well.

http://www.alhambrapartners.com/2018/06/25/revisiting-china-and-devaluation-as-china-revisits-devaluation/

In reply to by arby63

Carla Houston Pinto Currency Thu, 06/28/2018 - 00:16 Permalink

 

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In reply to by Pinto Currency

Precious Hawk Carla Houston Thu, 06/28/2018 - 05:18 Permalink

So China pretends to send us useful stuff and we create money to pay for it.

Who is winning?  Each dollar we send over to China is a virtual IOU; it does not have to be spent, but it can be.

Their workers have a steady income and spend into the local economy.

We hardly make anything at all, in fact we have resorted to building cars in tents, by robots that don't work, with batteries that are better at barbecues than producing electrickery.

Just suppose China decided to sell all their treasuries and buy pretty rocks. How would the treasury then issue more money?

They would have to pay higher interest, and the US debt would be unsustainable, even if it did not increase.

I'm not sure that we are winning.

 

In reply to by Carla Houston

BitchesBetterR… HopefulCynical Wed, 06/27/2018 - 22:26 Permalink

You got it all backwards: 

China is the one that will survive longer because THEY MAKE THINGS - USA does NOT make things anymore, therefore If China loses the USA market- they have the rest of the World to trade with and the USA void can be easily be filled in by the 1 billion Chinese consumers, as opposed to the mere 360 million USA consumers...... 

The USA?  If China says fuck off to that market, please tell me which country is going to fill that void at such massive scale? 

please use logic & common sense, as opposed to emotion. 

In reply to by HopefulCynical

Taint Boil BitchesBetterR… Wed, 06/27/2018 - 22:55 Permalink

Spot on - surprised how most don't get it.

Supply and demand:

Supply goes away [stop buying from China] prices goes up, consumer hit.

High demand [no more from China] someone else will make (or buy from China) for higher price, consumer hit.

Any tariff will just be passed on to the consumer.

Make it in America? LMAO, Jeans would cost $350, iPhone would go up $600 .... but yeah FUCK those Chicoms we don't need them!

 

In reply to by BitchesBetterR…

rtb61 HopefulCynical Thu, 06/28/2018 - 01:42 Permalink

Russia on it's own can supply China with everything China needs and oh look China can supply Russia with every thing Russia needs.

Everybody hates the US the most because arrogant arseholes always threatening to kill everyone and everyone is edging away from the US toward Russia and China, oh yeah because American first, all others countries must lose, must supply resources and labour in exchange for being occupied er protected by US forces.

The crazy crap coming out of the US where you still pretend you are the good guys in the face of all the criminal action across the globe, Uncle Tom Obama's Syrian Rape Brigades that basically raped entire cities.

China and Russia ain't the problem, it is the US and it corrupted government that is the problem, evil is as evil does.

In reply to by HopefulCynical

TRM Four Star Wed, 06/27/2018 - 22:07 Permalink

"Intragovernmental"??? WTF is that? One level of US gov buying FED bonds? State and city? That is a huge chunk. 

Domestic 32%, Intragov 27%, FED 11% so added all together that is 70% of bonds issued by the US held in the US. Hmmmmm.

The gulf states of the Arabian peninsula hold 4 times as much as China. 

In reply to by Four Star

CashMcCall joego1 Thu, 06/28/2018 - 02:17 Permalink

Oh really Trumptard? The surrender your computer, modem, smartphone, LED TV, and all consumer electronics. Then your clothing and shoes, most of which are now made in China. Remove the Piano from your Study. China is the leading maker of concert pianos at Pearl River. Then remove your cookware, glassware. China is the largest maker of cookware and glassware. Your lawn mower is made in China. Then we have rare earth metals mostly mined in China... you were saying your moronic TrumpTard?

 

In reply to by joego1

Taint Boil shizzledizzle Wed, 06/27/2018 - 23:52 Permalink

Markets dictate price, not the seller.

Agree 100% (I don't think my cable / Internet company got that memo).

But you said 6% across the board .... and everything comes from China. Of course my 6% example is an extreme over simplification but my cable bill is a good example - if it goes up 6% I will pay, I don't have another option ... if it goes up 20% I will turn off then the market will dictate the price and it will drop to 7% and I will pay again. Rinse and repeat at 8%, 9%, .....

 

In reply to by shizzledizzle

ElTerco tmosley Wed, 06/27/2018 - 21:44 Permalink

"FYI, only idiots think that trade is a game where you have one winner and one loser."

Trump only understands or cares about the short term effects of winning the game of Prisoner's Dilemma -- in other words he is that one loser who thinks he can win. The problem with Prisoner's Dilemma is that you can only "win" for an instant, and no one playing can ever reach that level of wealth again.

In reply to by tmosley

GoldmanSax Wed, 06/27/2018 - 20:53 Permalink

We buy way more shit from them than they buy from us. Chinese can and do produce for themselves. Commies are thick as thieves. The globalists empowered them and they will also cause the accident that reduces their population. Unfortunately.

Precious Hawk GoldmanSax Thu, 06/28/2018 - 05:32 Permalink

So, the Globalists empowered the Chinese.

Who do you think empowered the USA, or do you really believe that you are superior?

It was easy access to money that put the USA at the top of the pile and as the liquidity dries up, it is being brought down.

The easy money brought corruption as well as wealth.

The plebs were used. They were milk cows generating wealth ready to be milked by the bankers.

All those Middle-Class families were taken down.

All their hard work over many nears was stolen.

Some even live in their cars or tents, having trained the foreigners who stole their jobs.

You were the crop; You are being harvested; they have no conscience or loyalty to any country.

Now, if you owe them money and are late with repayments, you might not be able to leave the USA. You will be turned away at the airport and you might not even be able to get a passport. If you were considering leaving, now is the time, while you still can.

Got Silver?

 

 

In reply to by GoldmanSax

nmewn Wed, 06/27/2018 - 20:54 Permalink

Yeah thats gonna hurt, really hurt, now that the US...NO LONGER HAS >>>THE<<< HIGHEST CORPORATE...tax rate in the world.

Oh the pain, its almost, unbearable ;-)

ElTerco nmewn Wed, 06/27/2018 - 22:33 Permalink

Hey, when you buy stuff, you have to pay for it. Without taxes, the USA is a deadbeat, "I will gladly pay you Tuesday for a hamburger today." What's done is done. The stuff has been bought (past tense) whether we individually agreed to it or not, and we are obligated to pay for it.

In reply to by nmewn