It’s time for everyone to admit that the trade war between the United States and China is not going anywhere anytime soon. With China due to celebrate the 70th anniversary of the proclamation of the People’s Republic on Oct. 1, nothing is going to give on the Chinese side for at least another month. Meanwhile, the United States has already slapped tariffs on just about everything except Christmas ornaments, baby diapers, and “live mushroom spawn,” whatever that is. And even those last few items are scheduled to be taxed starting Dec. 15, after U.S. stores are fully stocked for the holidays.
As the trade war enters a phase of stagnant trench warfare, the real action has shifted to the currency markets. The Chinese yuan is closely pegged to the U.S. dollar, with China’s central bank, the People’s Bank of China, fixing the official rate every day but allowing the currency to float plus or minus 2 percent on offshore markets. These days, that usually means minus. In fact, the yuan has fallen more than 5 percent since trade negotiations broke down at the end of April.
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