China’s Currency Moves Escalate Trade War, Rattling Markets

Zippy Duvall, the president of the American Farm Bureau Federation, called the announcement “a body blow to thousands of farmers and ranchers who are already struggling to get by.” American exports to China fell $1.3 billion during the first half of the year, and American farmers now stand to lose all of what was a $9.1 billion market in 2018, Mr. Duvall said. That had fallen from a $19.5 billion market in 2017, before the trade war began.

The escalating trade war already threatens to end what had looked to be a modest global expansion. The American economy still looks relatively strong, but growth in the service and manufacturing industries is slowing. The European economy has also been weak, as the trade war weighs on export-dependent economies like Germany and Italy. China’s growth has been hurt by the trade war, which has compounded some of its homegrown problems. Other countries that depend on China’s voracious economic machine, such as Japan, have been harmed as well.

Yi Gang, the central bank’s governor, attributed the move in the renminbi, or RMB, to market forces, adding that many currencies had depreciated against the dollar recently. “I am confident that the RMB will continue to be a strong currency,” Mr. Yi said in an article published to the social media account of the central bank.

The renminbi weakened about 1 percent against the dollar overall, a move that is not necessarily significant on its own. But that Beijing allowed it to breach a level that was long considered symbolic raised questions about whether the move was a deliberate threat from China’s top leaders, who would most likely have to give permission to the central bank to let its currency fall to such a level.

“The currency is largely controlled by the P.B.O.C., but the P.B.O.C. does not have the independence to decide on its own the level of the renminbi,” said Michael Pettis, a professor of finance at the Guanghua School of Management at Peking University, referring to the central bank.

“This was clearly a decision made higher up,” Mr. Pettis said.

Mr. Trump has increasingly looked for ways to counteract China, including considering whether the United States should weaken its own currency. Mr. Trump and his advisers discussed intervening in currency markets to artificially weaken the United States dollar in late July, but the president decided against the idea.

The president has also been jawboning the Federal Reserve to cut interest rates, including on Monday.

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