Asia Stumbles into Year of the Currency War

As the trade battle comes up short, US President Donald Trump is ramping up the next theater of conflict in the dispute with China.

By William Pesek and cross-posted from Asia Times

By his own metrics, US President Donald Trump is losing the trade war, and humiliatingly so. Sure, China’s gross domestic product is taking big hits, no matter what Beijing admits in official data.

Trends in exports, fixed-asset investment, purchasing managers’ orders and Apple Inc’s earnings are all evidence of a marked downshift in mainland activity.

But Trump had three goals in mind when he slapped tariffs on US$250 billion of Chinese goods – two in the short run, one for the longer term. The first two were a big reversal in trade-deficit trends and a celebratory Wall Street rally. The long-term objective was halting China’s designs on dominating tech and other key sectors by 2025.

And yet, Washington’s monthly imbalance with Beijing just hit a record high. Through October, US exports to China were down almost $1 billion from a year earlier, worth about $102 billion. What’s more, Washington’s overall deficit with the world is on track to surge by $100 billion on Trump’s watch since early 2017.

Lehman Brothers crisis

In 2018, the Dow Jones Industrial Average posted its worst loss since 2008, the year of the Lehman Brothers crisis.

Goal number three of stopping China’s rise in its tracks isn’t happening. As China’s President Xi Jinping made clear in his New Year’s speech, the reform drive will not “stagnate.” In other words, the ambitious “Made in China 2025” plan that Trump fears remains on track.

As the trade war comes up short, Trump is ramping up the next theater of conflict: the currency markets

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