China's yuan plunges again. Is a currency war coming?

Asian markets fall as China US ready for more tariffs

The Trump administration imposed punitive duties on $34 billion worth of Chinese imports to the U.S. in early July and said another $16 billion worth of electronics and plastics would be targeted after a public comment period. The hats are being produced for Trump's 2020 re-election campaign despite his campaign official's claims that all of their merchandise is made in the U.S. The International Monetary Fund warned this week that a trade war could lower global growth by as much as 0.5%, or $430 billion, by 2020, with America "especially vulnerable".

MR CUI TIANKAI, China's Ambassador to the United States, on the growing trade dispute.

The dispute between the world's two largest economies stems from accusations that China steals technology from US companies or forces them to hand over technology to Chinese companies as well as differences over the USA trade deficit with China.

Beijing's retaliatory tariffs have hit American soybeans and pork. And last week, the administration announced plans for yet more tariffs on $200 billion worth of additional Chinese imports.

Beijing vowed "firm and forceful measures" in response.

"We're in a world of firsts and tweeting about the Fed, not once, but twice, doubling down, that the president is trying to exert pressure", said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group LLC in Pittsburgh.

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"I'm not doing this for politics - I'm doing this to do the right thing for our country", he added.

Ironically, this plays into China's short term strategy as a de-valued Yuan will help China to equalise tariffs in its trade with the United States thus making numerous new protectionist barriers essentially toothless against American businesses and consumers buying these "de-valued" goods with an increasingly strong Dollar.

China's central bank is already allowing the tightly controlled yuan to drift lower against the dollar in a bid to help Chinese exporters cope with Trump's tariff hikes.

Mr Trump also criticised previous U.S. administrations for not standing up to China, claiming that unspecified Chinese officials told him "nobody would ever complain until you came along - me". Investors have anxious that the trade war and other disputes involving the US could slow down the global economy.

"Make America Great Again" hats made in China are reportedly being held up at USA customs due to Trump's escalating trade war. Opponents of the new trade restrictions lined up to vent as the Commerce Department held a hearing on whether auto imports pose a threat to US national security.

"Automobiles - that's the 800-pound gorilla", Brookings' Dollar said.

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In a series of tweets on Friday, Mr. Trump said China, the European Union and others had been "manipulating their currencies and interest rates lower" while the dollar gained in strength, eroding "our big competitive edge".

In a television interview on Thursday, US network CNBC quoted Mr Trump saying a strong dollar "puts us at a disadvantage" and adding that the Chinese yuan "has been dropping like a rock".

Fed non-voter Bullard spoke with a dovish tone when he stated that USA rates were high by global standards, that Fed forecasts indicate further gradual tightening but that curve inversion may be imminent and would be a bearish signal.

Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018.

The dollar had reached that high after Federal Reserve Chairman Jerome Powell expressed confidence in the USA economy and affirmed expectations that the central bank was on track to keep hiking interest rates gradually.

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