TRADE WAR: U.S & China Negotiate to End Trade War


The United States and China held negotiations to end the trade war, and are discussing the rejection of the competitive devaluation of national currencies (the dollar and the yuan) to stimulate their own exports. As  of Central Bank of China head Yi Gang stated during the last meeting with the Americans, the parties’ commitments made at previous G20 summits were discussed, including the rejection of competitive devaluation and the use of exchange rates for competitive purposes.

At a press conference, Yi Gang, who took part in the last round of talks in Washington, along with Chinese Deputy Prime Minister Liu He, US Trade Representative Robert Lightheiser and Finance Minister Stephen Mnuchin, did not clarify whether the parties reached any specific agreements that go beyond previous commitments made on the margins of the G20.

According to him, the talks also referred to “how to respect each other’s monetary authority when deciding on their own monetary policy”.

Note that the Central Bank of China has already expanded the range within which the yuan is allowed to fluctuate relative to the dollar-dominated basket of currencies, but the maximum daily change is limited to 2%.

The framework of these negotiations reveal several interesting elements, and help to clarify the real policies of the United States and China. Specifically, that China indeed is engaging in currency devaluation, a charge leveled at China by the U.S president, Donald Trump. Likewise it reveals that the Trump administration has indeed been engaged in a significantly different monetary policy with regard to dollar valuation, one aimed at increasing imports in the medium-to-long term, while experiencing elements of price inflation in the internal economy in the interim.

The statements made by Yi Gang reveal that indeed the U.S has been involved in a trade-war with China, and was not a media spectacle as previously believed by critics of the Republican administration.

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