Trump threatens tariffs on all $505bn of Chinese imports

China has been cracking down on excessive debt in its financial system but policy-watchers now expect Beijing to shift toward looser monetary policy, and potentially stimulus, to shield its economy from the trade row.

MSCI's gauge of stocks across the globe gained 0.45 percent, helped by Asian markets.

A weaker yuan risks increasing trade tensions with the Trump administration, which has repeatedly accused China of keeping its currency artificially weak to support its huge export industry.

Currency wars occur when a number of countries seek to depreciate the value of their own currencies in order to stimulate their economies, Investopedia writes.

Then the bean really amps it up, saying: "Trump wants to win over more voters by starting a trade war".

The yuan fell to 6.7943 per dollar by late morning on Friday, down 0.28 per cent, according to Bloomberg data, and is at its lowest levels in a year following an accelerating slide in recent weeks as the trade conflict heated up.

China can also undo the impact of the U.S. tariffs by devaluing the yuan by 8 per cent.

"The central bank wants to use the currency movements to achieve internal and external economic balance".

The dollar index rose 0.13 percent to 95.208, after rising as high as 95.652, with the euro down 0.01 percent to $1.1637. He says ECB President Mario Draghi may elect to step into the fray at the central bank's July 26 policy meeting, given American attempts to talk the dollar down in January were extremely unpopular in Frankfurt.

On Wall Street, the Dow Jones Industrial Average fell 134.79 points, or 0.53 percent, to 25,064.5, the S&P 500 lost 11.13 points, or 0.40 percent, to 2,804.49 and the Nasdaq Composite dropped 29.15 points, or 0.37 percent, to 7,825.30. China promptly levied taxes on the same value of United States products.

"By running tight monetary policy and loose fiscal policy, Trump has put nearly flawless conditions in place for a rally in the dollar", said Karl Schamotta, a strategist at Cambridge Global Payments in Toronto.

"There's no question that the weakening of the currency creates an unfair advantage for them", Mnuchin said.

The Treasury's next semi-annual foreign-exchange policy report - the government's formal channel to impose the manipulator designation - is expected in October.

Data released by the US Census Bureau show that in 2017, the US imported 505.5 billion worth of goods from China, while its exports to China amounted to only $129.9bn.

A cheaper yuan will make Chinese exports less expensive and has the potential to boost sales overseas. "We don't usually know the extent of intervention".

"Currency is now part of the trade war, folks", said Greg McKenna, market strategist at AxiTrader.

And analysts have warned the devaluation of the yuan could be the first signs the ongoing trade war is descending into a currency war.

"The barrage of commentary will likely force the market to scale back long dollar positions".

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