China and the United States are locked in a commercial skirmish that has already been reflected in the ghostly dance of their currencies. This absurd competition rewards the one who seems more angry and the one who steps on his partner or throws himself more often on her at each turn. It is a dance of pachyderms that, if it were not for its serious consequences, we could consider ridiculous.
The prehistory of this macabre dance is known. The first world power has been suggesting, during the last fifteen years, and in this Bush and Obama agreed, that the second is a common thief and manipulator of coins that steals their factories and precarizes the lives of their workers, forcing them to compete with the Cheap labor from Shenzhen or Canton. Those words used to reflect the pre-electoral heater or anticipate discreet negotiations and little else. However, now, the ferment of indignation, based on the free interpretation of real facts of hundreds of communities abandoned to their fate in front of the powerful currents of globalization, has contributed to the victory of Donald Trump.
The new president, who defines himself as a winner, has agreed to become the spokesman for these victims of globalization and has held the banner of protectionism as only he could have done, in his country, the Social Democrat Bernie Sanders. The popes of the Republican Party, from George Will to William Kristol, have not yet recovered from the jug of cold water. The coins, and any element that symbolizes international trade, shiver in consequence to the dictation of American nationalism and protectionism.
The renminbi and the dollar could not stop reacting to what is more and more like a commercial war. In April, Trump's specific threats began, in May there were high-level meetings between officials of both countries and in July the White House imposed tariffs on 34,000 million in Chinese products. Trump said this summer that he is willing to add over 200 billion dollars in Chinese imports and then in full, which amounts to an impressive 500 billion dollars. The average voter of the tycoon will soon verify that the shopping bag becomes more expensive, but it is difficult that, burned by nationalist rhetoric, find responsible in the Oval Office.
In Beijing they know that, in the short term, you have to minimize the damage, collect the debris and little else. The elections that will renew part of the US Senate and Congress are held in November. They have avoided a rhetoric similar to that of Trump, have promised to approve tariffs for a value similar to that of their rival to save face (34,000 million dollars) and have let their currency (called, indistinctly, yuan or renminbi) devalue close to 10% up to levels never seen since June of last year.
Depreciation or devaluation is a way to help companies export, because the less the renminbi is worth compared to the euro or the dollar, the less Chinese goods sold in Europe or the United States cost in comparison. If Trump raises tariffs by 25% to a basket of Chinese goods and the Asian giant's currency falls by 10%, Beijing may even win if the basket is relatively small. Why? Because tariffs would affect a minority of Chinese exports to the United States, while the fall of the yuan would affect all Chinese exports both to the United States and to the rest of the countries that trade with the second world economy.
Anyway, in such an electric environment, the questions are piling up: is the beginning of this possible commercial war the prelude to a currency war? Will the yuan and the dollar be measured in a heavyweight bout where only one can stand?