CHINA WINNING SO FAR

A depreciating yuan makes Chinese goods cheaper for foreign buyers, partially offsetting the effects of tariffs.

Example

Let's say a Chinese good costs 650 yuan:

- At 6.5 CNY/USD, the price is $100.

- With a 25% tariff, the price becomes $125.

If the yuan depreciates to 7.5 CNY/USD:

- 650 yuan = $86.67

- With a 25% tariff = $108.34

Key Implications

1. Tariff Offset: A weaker yuan reduces the impact of tariffs, acting like a built-in discount.

2. Competitive Advantage: Chinese exporters remain competitive despite tariffs.

3. Inflationary Pressures: A weaker yuan can hurt China by making imports more expensive and increasing inflation.