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Stocks suffered their worst day of the year as the US/China trade war just erupted on a whole new front: the currency battlefield. More below.
Stocks plummeted because of China's dramatic currency move
Not quiet on the Eastern front... Governments worldwide let the free market determine how much a dollar, peso, real, or pound is worth through supply and demand. Europe buying some fancy American corn? They'll have to sell euros and buy dollars first. That's why those airport currency exchange boards are constantly changing. But China's government does the opposite — it dictates how much yuan each $ is worth. Then this happened Monday:
Currency manipulation = Tariff kryptonite... China just opened up a whole new front in the trade war because this move neutralizes US tariffs. It's an intense escalation, but it's classic trade war tit-for-tat-for-tit-for-tat. Here's why it went down:
Nobody really wins in a trade war... At first, US tariffs hurt China by making it more expensive to manufacture across the Great Wall, encouraging US companies (like Apple) to make stuff elsewhere. Now, China's currency manipulation hurts American companies because their Chinese competition is suddenly cheaper for customers to buy. Trade wars are races to the bottom (welcome to the new front).
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