After Trump admin declares China a currency manipulator, China moves to stabilize yuan; stocks rebound

Fred Imbert and Silvia Amaro for CNBC:

Stocks rebounded on Tuesday after China’s central bank indicated it wanted its currency to trade at a higher level than expected against the dollar, easing tensions about the nation using its currency as a weapon in the trade war… Overnight, China’s central bank set the yuan’s official reference point at stronger than the key 7 yuan-to-the-dollar point on Tuesday. The move calmed currency markets, initially rocked by fears the U.S.-China trade war was devolving into a currency war.

Shares of companies whose future prospects hang in the balance because of the trade war led the rebound in early trading. Caterpillar, Apple and Micron all traded higher.

On Monday, the Treasury Department designated China a currency manipulator, a move that has not been seen since the Clinton administration. Beforehand, Trump took to Twitter to voice his opinion on the currency move.

National Economic Council Director Larry Kudlow told CNBC’s Squawk on the Street on Tuesday that Trump was still open to a trade deal between the U.S. and China that would lead to flexibility on tariffs. “The reality is we would like to negotiate,” Kudlow said during a live interview. “We’re planning for the Chinese team to come here in September. Things could change with respect to the tariffs.”

MacDailyNews Take: As we wrote during yesterday’s wild drop, “it’s good to rememeber that it’s always darkest before the dawn.”


    1. Not so fast, Winner.

      Wednesday headline:
      “Wall Street drops as bond market stokes recession fears”

      “U.S. Treasury yields took another dramatic drop and the premium on three-month bill rates above 10-year note yields was at its most elevated levels since March 2007. This so-called inversion between the two maturities has preceded every U.S. recession in the past 50 years.”

      “The central banks in New Zealand, India and Thailand on Wednesday cut rates amid fears that the trade war could hit global growth.”

      Turns out that trade wars have much bigger piles of unintended casualties than the narrow minded Trump Cult would have you believe. Apple is not immune. Apple’s pivot from being a superior computer maker into being a media producer/leasing company and a credit card company isn’t shielding itself from the fact that all its hardware is produced in China. Apple down -0.2%, Goldman Sachs down -1.7% so far wednesday.

      Enjoy the ride. Trump took a “terrible” steady economic recovery and turned it into a volatile global mess. The question isn’t when he triggers a recession — US farm sector is already feeling that — the question is when the hardcore Trump Cult members wake up and realize they’ve been conned by a Reality TV actor who is a puppet for even richer oligarchs.

  1. China has been cheating for decades. Someone has to stand up to them and it will cause pain but in the end they have more to loose than we do. Fair trade helps everyone. Love or hate Trump he’s the first person to get tough with China.

  2. These are the same policies that brought on the Great Depression. So far all these trade wars have failed. NAFTA 2 is as bad as NAFTA 1. A small cosmetic change is trumpeted as a victory while companies open more manufacturing in Mexico.

  3. “Darkest before the dawn”?

    If you think that dawn is near, then you don’t have a clue about the economic war that is going on. It is a prelude to a wider war for maintaining our unipolar hegemony.

    If anything, China letting its yuan devalue for a day like it did is a warning to the U.S. that it is capable of inflicting great harm on our economy. Anybody who thinks that China clamping down on the yuan was in response to a Trump tweet doesn’t understand the far wider stakes at hand.

    Sad to see MDN get swept into geopolitics of which it has no experience. It would be better to keep the commentary to how this all affects Apple, instead of playing prognosticator and editorialist of wider events.

    Much of the Apple constituency does not support Trump and his white nationalist goals. So it would be best to keep the site politically neutral.

    1. Your interpretation of “darkest before the dawn” is just that, your interpretation. I read MDN’s Take and see hopefulness for a U.S-China trade pact, not an endorsement of Trump.

      I fear you’re suffering from TDS, based on what you’ve written and the data-free conclusions to which you’ve jumped.

      1. Suffering from The Daily Show? What the hell does that mean?

        And no, Sarah, “darkest before dawn” does not have a range of interpretations that everyone can choose for themselves. It is a very clear metaphor that the increasingly desperate Trumpanzees have glommed onto to keep their hopes alive for future economic prosperity. Despite the gathering signals of stormy economic weather ahead.

        Problem is, Trump can’t rightly claim ANY concrete success in ANY trade negotiations (nor disarmament negotiations) he has entered yet. Everything in his worldview is a photo op. Where are the signed treaties from the self-proclaimed greatest dealmaker?

        What China just did is send Trump a clear signal that if he wants to play trade games, China is holding the winning hand. Make no mistake: Trump has been pressuring the Fed to devalue the dollar for many months. China just did what Trump wished he had the power to do. Instead of tweeting about it, they just clobbered Trump upside the head to remind him that he has severely underestimated the economic damage that will result if Trump wants to play hardball without bringing a bat.

        If Trump had strategically expanded free trade agreements with reliable trading partners BEFORE attacking China, then China would be isolated without other customers for their junk. But by going it alone, China can easily wait out Trump’s madness. They can find other buyers. The world will continue to buy cheap Chinese junk because, if you haven’t noticed, that’s just about all US retailers offer to the US consumer, just like every developed first world nation. The allure of cheap labor and zero environmental regulation was just too tempting to corporate leaders for the last 2 decades. To a man, all CEOs claim that it was their fiscal duty to sell out domestic workers so that short term corporate profits (i.e., executive bonuses) could grow — and they did this fully knowing that it was arming China to be the biggest tech thief in history.

        What’s Trump’s next move? Most economists say that he has 2 choices. Either he steps back and uses multilateral diplomacy to smooth over global trade and enhance fair trade provisions, or he continues his “easy to win” war and sets up China to really manipulate their currency: checkmate, China “wins” and the world economy is triggered into another steep recession. The Trumpanzees all caught up in the cult of braggadocio of the Orange Duce are clearly not understanding the economic peril that the USA could find itself in. Wall Street won’t care — it’ll be working class families that get screwed, as always.

      2. Put down the Trump kool aid.

        EVERYONE in America wants China to be held accountable. Except of course all those people buying cheap sh!t at Walmart. Yep, even those with MAGA hats.

        The question is, when has a mature economy nation ever improved its relative trade advantages by taxing its own consumers? Anyone????

        Trump sadly isn’t smart enough to have a coherent strategy. What’s the endgame? How many billions will US consumers have to pay before China feels any pain? China will happily sell to other customers. Why isn’t Trump working in lock steps with other trading nations to force China to end its unfair practices?

        The truth is plain to see. China just sent a strong signal and the Trump administration, or its paid bloggers at least, are too stupid to understand it. First Trump started a trade war without any ammunition, now he’s got a currency war too — with a nation 4 times as big as the USA. Good luck with that.

    1. You realize that by pressuring the Fed to lower the prime rate, Trump would also be manipulating the value of a dollar?

      The US by the way has a long history of weakening the dollar whenever it wants to appease Wall Street. Remember when the Euro was launched in 2000, it was intentionally set at parity to the US dollar. US Fiscal policy from then on prompted intentional weakening so that the dollar remains 10+ percent weaker in an attempt to maintain export advantage. Don’t pretend otherwise.

      Problem is, that game can’t continue forever. At some point a nation has to produce goods and services more efficiently than others if it wants to prosper. The number of industries that have distinct long term competitive advantage is drying up. The US makes more emojis and toxic financial derivatives, but not so much superior hardware. Does Apple make anything here? Why not?

      US has not done much to keep its workforce the most productive. The last 30 years have all been about automation that replaces humans, which is nice, but what do you do with the excess labor? Do they become doctors and lawyers? No, they become minimum wage baristas and Apple retail smurfs. Why aren’t geniuses in America making exciting new companies and products? Well lack of skills is the #1 reason experts and hiring companies complained about. Alas, ultraconservatives have blocked all bills proposing worker retraining and Apple refuses to train Americans to build computers. “Those jobs aren’t coming back”, they said. So US students are raped with insane education costs that don’t prepare them for earning a stable career. There is no new GI bill that Moscow Mitch will even allow to be discussed in the Senate. Low skilled workers have definitely been left behind while dickheads like Zuckerberg make out like bandits. Classic inequality problem with nobody doing anything but lip service to fundamentally solve. Least of all strongman wannabe Trump, who is so corrupt he appoints his children as tsars to lead do-nothing photo op business councils where Trump can blab about Tim Apple. Zero legislation and zero infrastructure improvement and zero labor or education investment.

      Aint it great now?

  4. What do these companies have in common, in no particular order?

    Marie Callender’s
    Barney’s NY
    Z Gallerie
    Payless ShoeSource
    Charlotte Russe
    Beauty Brands
    Innovative Mattress Solutions (Mattress Firm parent)
    Things Remembered
    Roberto Cavalli
    Kona Grill
    David’s Bridal
    Papa John’s
    Sports Authority
    Toys R Us

    These are just a few of the approximately 67000 US companies that are in Chapter 11 bankruptcy restructuring or are being liquidated this year. Strong economy, huh?

    Lest you think this is simply Amazon putting small retailers out of business, consider this report from the US Farm Bureau:

    “As annual average loan delinquency rates have increased for 24 consecutive quarters, so too have farm bankruptcies over the prior 12 months. Through June 2019, and over the prior 12 months, there were a total of 535 Chapter 12 bankruptcy filings, up 13%, or 60 bankruptcies. The number of Chapter 12 filings over the previous 12 months is the highest level since 2012’s 582 filings.”

    And yet the president hasn’t lifted a finger to negotiate agricultural trade deals with countries that might want to buy US products. GOP offered welfare instead. Nobody at Faux News started ranting about GOP socialism, however.

  5. Look, I’ve been arguing that Apple (and other companies) should deleverage their Chinese based production for some time now. However talk about China manipulating their currency in this case is incorrect. China’s economy has been under pressure for some time now and this has predated the tariff wars. If left alone China’s yuan would have depreciated much further. Is that currency manipulation?

    What China has been doing is supporting their currency from further depreciation and in response to the latest tariff announcement from the Trump administration it stopped supporting the currency. It has since put a floor under the yuan. Is that currency manipulation?

    China has a huge ace up their sleeve and it has and it has nothing to do with currency manipulation or tariffs and it’s the rare earth market. China controls 90 percent of the market and if they decide to pull the plug on this area of production then it will send the US (and world economy) into a tailspin. They haven’t done this yet and let’s hope they don’t do it. However, I repeat what I said before that when your economy is slowing, unemployment is rising and your debt is ballooning then it is only natural that your currency will depreciate.

    If you want to call China authoritarian, then that’s fine. If you want to call them anti-democratic, then that’s fine and you want to call Xi Jingping Winnie the Pooh then that’s fine as well (as long as it’s not in China). However let’s separate the politics and the rhetoric from economics and let’s get it right.

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