I see that China is reported as having blinked in the one day currency war:
Dow closes higher after China blinks
Dow Jones Industrial Average
The Dow and the broader US stock market rebounded Tuesday, driven by optimism that currency tensions between the United States and China would ease.
INDU) finished up 312 points, or 1.2%, while the S&P 500 (SPX) closed 1.3% higher. The tech-heavy Nasdaq Composite (COMP), which was hit worst in Monday’s selloff, closed up 1.4%. …
The yuan continued to slide Tuesday, but the pace of its decline slowed. One dollar last bought 7.0235 yuan in China, and 7.0530 yuan in the offshore market, where the currency trades more freely.
Stock investors also took comfort after the Chinese central bank announced plans to issue central bank bills worth 30 billion yuan next week. That propped up China’s currency, which bounced back slightly against the dollar after the announcement. [CNN/Business]
But is this the only reasonable way to interpret events? In all but the most barbarous of conflicts, it’s necessary for the two sides to be able to communicate, whether it’s as for truce, surrender, prisoner exchange – or something else.
In this case, the two warring countries, America and China, have been bludgeoning each other with financial weapons. My interpretation isn’t that China “blinked,” because Chinese leader Xi Jinping cannot afford to be seen as weak, either within or outside of China. After all, in practical terms he’s an autocrat, and autocrats are never guaranteed their seats of power – they have to prove themselves both tough enough and competent enough to keep them. If Xi even looks like he’s weak, he might suddenly be retired by some younger wolf, hungry for power.
Another interpretation, one that makes Xi look tougher, is that he was waving his war club around enough to demonstrate to Trump, a known coward and deeply confused about foreign policy, that Xi has the power to screw up the economy of the United States if he so chooses, and is willing to pay the price, which would be uproar in the Chinese economy as well.
In this respect, the open-ended nature of Xi’s power puts him in a commanding position with regards to Trump, who must win a Presidential election in order to remain the Chief Executive of the United States – and who is vulnerable to impeachment and removal if he begins to lose his base to disillusionment. Indeed, if he loses the GOP faithful to economic disappointment, he may resign in disgrace rather than continue.
And Xi knows this.
China may have blinked, but only with planning and malice aforethought. If Trump tries to continue the tariff and currency war, we may see China resume its currency manipulations, and while Trump’s attacks on American politicians may sting, I really doubt Xi gives a shit if Trump calls China a currency manipulator.
He has bigger fish to fry.
