Does anyone know of any nice interactive models to play with that demonstrate trade, tariffs, and currency levels? I just don't have an intuitive sense for this yet.
Trade is dependent more on environmental policy than currency ratios.
Tariffs reduce profitability of imports making them less viable for firms to use.
China’s success largely depends on low interest rates caused by the printing of money, not by a devalued currency which would be temporary as prices would adjust because as notathing says, there is international arbitrage in everything.
I think many expected this to happen, but what is interesting is that it happened today, so long before the election. China is effectively signaling that it can do a LOT more of this leading up to the election.
Imagine a lager currency adjustment that sent the Dow down 3K points. A lot of people are imagining that today who were not thinking about it before.
So this puts a lot more pressure on Trump to pull back on the tariffs. But Trump won't want to do that yet, so China has a bit of time to illustrate that Trump is not in control of things the way he claims to be.
As someone who does not want the US Government meddling in the economy, I'll be very pleased if China manages to force Trump to repeal the tariffs, regardless of whether China continues its own backward trade policies.
I think they will want to do that, but ultimately the US has limited ability to do certain things.
> couldn't that eventually obliterate trade relationships entirely and make war more likely?
Yes, that is in my opinion the worst aspect of Trump's trade policy. Economic cooperation between people of different nations helps prevent war. Trump is punishing Americans for cooperating with Chinese exporters, while trying to vilify the Chinese government, Chinese academics studying in the US, etc.
It's a horrible and repugnant political ploy. The US woke up and looked in the rear-view mirror and saw that China caught up dramatically in the past few decades (during which the US wasted trillions on the middle east).
China did not waste trillions in the middle east. Instead Xi lifted an unprecedented number of people out of poverty and invested heavily in Africa. China pours more concrete in a month than the US does in a year, and China produces more top tier hard science research than the US, not to mention China's top universities are 100x more competitive than Harvard.
Trump's actions reveal a weak and flailing US, the worst thing any of us can do is assume that he has a clue what he's doing in any kind of negotiation or foreign policy scenario.