Many analysts agree that the U.S-China trade war is not coming to an end anytime soon. Despite the ongoing battle between the two largest economies in the world, China is set to become a global currency heavyweight in the coming years.
Could The Yuan Replace The Dollar?- Video Transcription
This weekend, the United States agreed to halt the additional tariffs in a deal that keeps the trade war from escalating as the two sides try again to raise their differences with talks aimed at reaching a point and an agreement within the 90 day time frame. If no deal is reached within the 90 day time frame, both parties have now agreed that the 10% tariffs will be raised to 25% according to the White House. The reason why this is important to understand is that over the course of the past few months, the United States and the value of the US dollar has continued to increase and people are trying to understand how the u s dollar is increasing when we're placing tariffs against China. People are under the impression that the reason that's happening or taking place is because the economy here in the United States is starting to improve based on the fact that we're placing the tariffs.
China themselves have been has been reducing the price of their currency to offset the 10% tariff that hasn't been placed on them. So that means over the course of the last six to 10 months, we've seen China reduce the price of their currency. Now, if you go back in time, you remember that China was also accused of currency manipulation after going at the latter portion of the Obama administration coming into the Trump administration. This is something that China continuously does on a regular basis. What they did is they said, look, if you'll dump US dollars to be involved with us, what we're going to do is is to get out of US dollars. We want you to buy the Chinese yuan and for doing so we're going to lower the price so you can get involved. The reason why that's important to understand with what's happening now is that the u s dollar has gained strength because China is reducing their currency.
Currencies around the world, the six main players, those currencies are traded just as stocks are traded on a daily basis if a company is doing poorly. But in this case, the current is doing poorly. People are getting out of that currency and they're going to the one that's becoming stronger. A few months ago, before the tariffs took place, the U.S. Dollar had already taken the quickest decline that we'd seen since 2003 nearly 15 years ago. The US dollar had lost over 24%, one of the quickest declines ever recorded in US history, and this was before the tariffs. So, the central banks around the world in the second quarter this year had already reduced their holdings in US dollars because of the decline that was already taken place by 38.2%. that is a massive decline on the US dollar. The long term effects of this are huge, especially for anyone that's holding money in US dollars. Don't get caught up in the stock market. We know the stock market is overvalued. We know it's going to go through ups and downs and very erratic up and downs. Be sure to click on the link below or call the number on your screen to get access to the newest report, ‘the next recession, here's what it could look like'. So get your electronic copy of this report today, and thank you as always for watching U.S. Money Reserves, Market Insights.