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China is a crown jewel of American multinationals. Even before it became a member of the World Trade Organization, U.S. policy was designed to make China open up as a manufacturer of low cost American consumer goods. Everything from Nike sneakers to Happy Meal toys were made in China, often by subsidiaries of American companies, or joint ventures where the American firm maintained a sizable position.
"Companies could relocate. The tariff burden on the producer side is not entirely born by Chinese companies, but by American companies," says Yang."When those 10% tariffs on the remaining $300 billion worth of Chinese imports goes into effect, it will be on consumer goods that have so far been untouched."
Recent depreciation of the Chinese yuan seals the deal on decoupling as there is simply no chance that Trump will reverse the tariffs if China's currency depreciates. A weaker economy means there is no way market forces alone don't push the yuan weaker against the dollar. It settled at 7.06 to the dollar on Wednesday, though that could change today as Shanghai stocks were up in the mid-morning hours.
Ever think that might be part of the strategy?
It is going down and happening very fast
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