The US has officially labeled China a “currency manipulator” on Monday — a move that saw billions of dollars of shareholder value getting wiped out from markets across the world.
According to the former President Obama advisor, Larry Summers, the new statement from Steve Munchin, the US Treasury Secretary, will further escalate the trade war between US and China, which has put the world economy in danger.
The US Treasury called China a “currency manipulator” after it let Yuan weaken more than 7 per US Dollar. This is the first time in over a decade that the Chinese currency has breached the 7 mark.
The new escalation has hit the global markets hard. The Australian market, the first major stock market to open following the escalation, dipped almost 3% within the first 15 minutes before regaining some of the losses to close 2.44% in the red. Stock markets across Asia, however, fared a tad better.
The Hong Kong stock market plunged by over 600 points before easing back a little to close 1.05% lower. Other markets in Asia also showed a similar pattern. All fell sharply at the market opening but recovered some of the lost ground before closing in the red.
While the Shanghai Composite closed down 1.56%, Japan’s Nikkei lost 0.65%, and Korea’s KOSPI fell 1.51%.
According to many experts, what’s most worrying is that neither President Donald Trump nor China’s President Jinping Xi is willing to back down.
While the interest cut from the Fed — its first in a decade — has given a boost to the markets, further rate cuts might not prove of much help as everything is getting downgraded because of the trade war.
Probably because of these reasons, Larry Summers tweeted that the latest escalation has driven the world economy to “the most dangerous financial moment since the 2009 Financial Crisis.”