What now since United States classed China as a "currency manipulator"?

Markets rocked as Trump hits out at Beijing sparking global sell-off

President Trump announced a new round of tariffs last week, which will be levied at 10% on $300 billion worth of imports beginning on September 1. Trump lashed out Monday, accusing China of using currency manipulation to "steal our business and factories, hurt our jobs, depress our workers' wages and harm our farmers' prices".

China, in response, announced its companies had stopped buying US agricultural products and said labelling Beijing a currency manipulator would "severely damage worldwide financial order and cause chaos in financial markets".

"In a strict sense, it's baseless for the USA side to determine that there was exchange rate manipulation based on the change in the exchange rate of the RMB (yuan) on a single day", said Zhang Anyuan, Chief Economist at China Securities.

The move roiled global stock markets, with the United States recording its worst trading day for 2019 and Asian and European bourses trailing lower on Monday and into Tuesday.

It is hard to see how a designation will change the situation other than fanning trade and currency war flames, said Mark Sobel, a former senior U.S. Treasury and IMF official who worked on monetary issues.

The move made its exports cheaper for United States buyers and American goods more expensive for Chinese buyers.

The United States has labelled China as being a "currency manipulator", accusing the country of changing the rate of exchange between the yuan and the USA dollar to create an unfair competitive advantage.

A weaker yuan helps exporters cope with tariffs of up to 25 per cent imposed by Trump on billions of dollars of Chinese goods. Global markets steadied on Tuesday as investors stepped back to take stock of the rapid escalation.

China "has not used and will not use the exchange rate as a tool to deal with trade disputes", the People's Bank of China (PBOC) said in the country's first official response to the latest US salvo. It's called "currency manipulation"'.

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Global growth concerns have risen as the trade war between the world's two biggest economies the U.S. and China sparked a stampede into perceived "safe-haven" assets. "The context of these actions and the implausibility of China's market stability rationale confirm that the objective of China's currency devaluation is to gain unfair competitive advantage in global trade".

"I think the tipping point for a more prolonged negative trend (for risk assets) is quite close", said Hans Peterson, SEB Investment Management's head of asset allocation. It now trades at more than seven to the dollar, its weakest level since 2008. US soybeans sales to China have since evaporated.

He added that the USA economy was still in good shape and said he saw no signs of a global recession on the horizon despite growing concerns the U.S.

At the time of reporting, one yuan was equivalent to US$0.14.

Strategists like John Higgins, Capital Economics" chief markets economist warn that the S&P 500 will plunge another 15% by the end of this year while BNY Mellon chief strategist Alicia Levine on Yahoo Finance's The First Trade, that China's yuan devaluation has investors "puking stocks'.

A currency war occurs when countries competitively devalue their currencies for trade purposes.

The Trump administration already has rolled out up to $28 billion in federal aid for U.S. farmers since the trade war began past year, and the U.S. Agriculture Department to date has made $8.6 billion of direct aid payments to farmers.

The offshore yuan has pulled back from a record low after Beijing appeared to take steps to prevent the currency weakening further, following a sharp drop that prompted the USA government to declare China was manipulating its currency.

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