Free Press Journal

Donald Trump hits where it hurts most

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American president Donald Trump’s recent tweet that US tariffs on imports from China are working ‘big time’ and that the stock market in China has crashed by 27 per cent in four months may be an exaggeration but there can be little doubt that China has been severely hit. The Chinese economy was riding on the strength of the import boom in the US market and there was a smug sense of satisfaction that nothing would go wrong. The US economy, on the other hand, was on the downswing. Whatever one may say about Trump’s indiscretions in other areas of activity, in this he has hit the nail on the head. There is a perceptible revival in the US economy today. Whether the Chinese counter-measures in full measure would set things right for China is a major question mark because US imports into China are not large.

As things stand, however, the yuan is down against the US dollar by 8 per cent since April and is close to its weakest in a year. A shrinking trade surplus produced a current account deficit in the first half of 2018, China’s first such trade gap in two decades. The Chinese are indeed threatening that the trade war could escalate unless the Americans relent. But the bigger loser in any escalation would be the Chinese themselves as it appears.