China’s ‘weaponised’ yuan, report of suspended US farm purchases create grim outlook for trade talks
- Beijing allowed the yuan to weaken beyond the political significant exchange rate of 7 to the US dollar on Monday morning
- China has also reportedly cancelled orders for US farm products in response to Donald Trump’s threat of increased tariffs on Chinese goods
China’s move to allow the yuan to drop below the level of 7 to the US dollar to “effectively weaponise the exchange rate”, coupled with a report of cancelled purchases of American farm products in response to the threat of increased tariffs from US President Donald Trump, create further uncertainty for future trade talks, analysts said.
The move raises the prospect of a currency war, dimming hopes for the world’s two largest economies to continue talks which resumed in Shanghai last week. Earlier, it was reported that China had cancelled orders for farm products from the United States having vowed on Friday to make necessary countermeasures against the threat of tariffs.
“Beijing won’t give in to Trump’s maximum pressure,” said Jian Chang, the chief China economist at Barclays. “Trump’s threats will only make the talks more difficult.”