Some people suggest that a use of currency depreciation may solve the problem related to the on-going trade war initiated by USA, and that could provoke export as well. I do not agree with this view, and do not support this stupid action either. Nobody can deny that the value of currency is backed by goods and service production, and its exchange rate with other currencies should be based on a fair standard (for example, gold). For example, one China Yuan can exchange US$0.15 based on the current rate (June 28, 2018). If both sides think this rate is fare, then that would be ok and a deal can be done.
President Trump blames that China had ~$375 billions trade surplus with the US last year, and should significantly reduce this figure in order to balance the trade. This would arise a big question why is so. And why would China not buy more goods from US to balance the trade?
The problem is that US may not have adequate goods to sell to China, or China has sold too much goods to the States. Now, let's come to the above mentioned currency exchanged rate, suggesting that the rate has been manipulated and should be adjusted to a fare figure. On one side, the US dollar lacks of sufficient supports from its domestic production. On the other side, however, the value of China Yuan backed by strong production has been undercounted for years. Consequently, a trade misbalance happens when the US is trading with China, resulting in that US is suffering from a big trade deficit while China has much high trade surplus. From this simple analysis, a conclusion can be reached that the currency exchange rate should be adjusted at least - one China Yuan equals to US$1.5. Only such operation shall ease the trade issue.
Therefore, China can buy more goods from the States by also reducing export to the USA simultaneously.
President Trump blames that China had ~$375 billions trade surplus with the US last year, and should significantly reduce this figure in order to balance the trade. This would arise a big question why is so. And why would China not buy more goods from US to balance the trade?
The problem is that US may not have adequate goods to sell to China, or China has sold too much goods to the States. Now, let's come to the above mentioned currency exchanged rate, suggesting that the rate has been manipulated and should be adjusted to a fare figure. On one side, the US dollar lacks of sufficient supports from its domestic production. On the other side, however, the value of China Yuan backed by strong production has been undercounted for years. Consequently, a trade misbalance happens when the US is trading with China, resulting in that US is suffering from a big trade deficit while China has much high trade surplus. From this simple analysis, a conclusion can be reached that the currency exchange rate should be adjusted at least - one China Yuan equals to US$1.5. Only such operation shall ease the trade issue.
Therefore, China can buy more goods from the States by also reducing export to the USA simultaneously.
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