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Comment by voodooranger | Hacker News Reader

so if there’s a chinese product that i like and it costs 100 yuan before devaluation, and say 1 dollar == 100 yuan. after devaluation, the product might cost 150 yuan but now 1 dollar == 150 yuan. so my dollar still buys the same amount of goods. what am i missing?

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Exactly.

This means US consumers will now have 50% discount on all Chinese goods, or a 50% tax on exactly the same US goods.

Terrible for US manufacturing.

https://www.nytimes.com/2019/08/05/business/china-currency.h...

See the section titled "How would that help China?

> Say you own a Chinese factory making lawn ornaments, and you sell a lot of pink flamingos to an American retailer. You price each at $1 — they may sell for far more in retail outlets in the United States, but shipping and storage account for most of that. When the renminbi is 6 to the dollar, that translates to 6 renminbi in sales.

> But when the currency depreciates to 7 to the dollar, that $1 flamingo is worth 7 renminbi in sales to you. Or you can cut the price — say, from $1 to 85.7 cents — and still make your original 6 renminbi in sales. Your American competitor, who has to buy and sell in dollars, has to grudgingly cut prices to compete.

It’s devalued in relation to other currencies. In China, 100 yuan still = 100 yuan. So your 1 dollar gets you 50% more than it used to (going by your example).

Effect is not immediate as most contracts are still written in USD. But the producer would still be paying wages in yuan so that many actually be a short term profit boost

Not exactly, it depends on the particular good. The price in yuan could stay 100 or not move as much. In that case your purchasing power has increased

So its a great thing for the US if we want to import more stuff?

So its basically saying: I see your 10% Tariff and raise you a 10% discount!

great for consumers, devastating for the whatever hobbled manufacturing base left in the US.

Pretty much, although with more revenue for the US government.

But doesn’t that also raise Chinese import costs the same amount? Or is that where Chinese tariffs in the things they import come into play (like Canadian canola, etc)?

This feels like a sort of race to the bottom.

in the aggregate if you devalue a currency so that it’s worth half of what it was, won’t prices in that currency double?

What you're missing is that the tariffs are meant to make the local manufacturers's similar product being sold at $1.25 more price competitive to you, but the devaluation will nullify that.

So it's a war between tariffs and devaluation.

> what am i missing?

The impact of exporting deflation across the global economy right at the moment it needs it the least. I'm looking specifically at the euro area, and what it does next.

You have it backwards. Lets assume that Chinese product does not have any US tariffs.

So it costs 100 yuan = 1$. After devaluation, it will cost 50 yuan = 50 cents. When tariffs hit, you pay 50 cents to the US treasury to import it, so it's back to $1.

In the next case, lets assume the tariffs hit first. Tariff of 50% makes the import cost $1.5, so China devaluation puts it back at $1 effective to you, after the tariffs you pay.

this also means that people in china cant afford products from the US, and China is a major consumer of goods, especially for large sectors of our agribusiness.

Also the fact that their yuan is worth less now is increasing uncertainty in the markets, and stocks dont like uncertainty, hence the sellof.

It means that basically the tarriffs have been wiped out and chinese savings took the hit.

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