Russian officials cautioned Tuesday that the country’s economy could face significant strain if China moves to devalue the yuan in retaliation against steep tariffs imposed by President Donald Trump amid an intensifying trade war.
Why It Matters
Speculation grows in financial markets that Beijing may slash the yuan’s value—potentially by as much as 30 percent—to soften the economic blow from U.S. tariffs. The White House escalated its trade war with China earlier this month, announcing that the country faced a 245 percent tariff on certain imports to the U.S. “as a result of its retaliatory actions.”
What To Know
Kirill Tremasov, adviser to the governor of Russia’s central bank Elvira Nabiullina, said that if China were to deliberately weaken its currency, the Russian market could be flooded with cheaper Chinese goods, undermining domestic manufacturers.
“If the parties [U.S. and China] go too far in this confrontation, the result could be a weakening of the Chinese currency,” Tremasov said. “This, in turn, increases the competitiveness of Chinese goods in other markets, including our own.”
“We have a significant share of imports from China. And from this side, risks could arise for Russian manufacturers. If there is a massive flow of Chinese goods into the Russian economy,” he said.
Tremasov said Russian exports to China are mostly raw materials which are “not very sensitive” to fluctuations in the yuan. “Therefore, the impact on exports will be insignificant,” he said.
This “may create certain risks for the Russian economy,” Tremasov said.
He warned that a prolonged trade war could result in a slowdown in global economic activity—affecting demand for raw materials, and therefore reducing Russia’s revenues for exports revenues, increasing pressure on the ruble, and creating “certain inflationary risks.”
On April 2, Trump imposed tariffs on more than 180 countries on April 2, triggering the stock market’s worst single-day performance since the COVID pandemic. Beijing responded by hiking tariffs on U.S. imports to 125 percent, while dismissing Trump’s tariff moves as “a joke.”
What People Are Saying
China’s Finance Ministry said in a statement on April 11 of President Donald Trump’s levies: “The U.S. side’s imposition of excessively high tariffs on China seriously violates international economic and trade rules, runs counter to basic economic principles and common sense, and is simply an act of unilateral bullying and coercion.”
What Happens Next
Economists have assessed that China is unlikely to aggressively slash the yuan’s value to offset the impact of Trump’s tariffs.
Allan von Mehren, chief analyst at Danske Bank, told Bloomberg in an article published on April 10: “The likelihood of a real devaluation is quite small. China does not want to add to the instability right now. I do think it is overblown.”
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