This Is Why China Is Winning the Trade War

Key Concepts

• Tariffs: Taxes imposed on imported goods.
• Exchange Rate (FX): The value of one currency in relation to another. Specifically, the USD/CNY (US Dollar/Chinese Yuan) exchange rate is central to this discussion.
• Currency Manipulation: A government action to influence the value of its currency.
• Strong Currency: A currency that has increased in value relative to other currencies.
• Weak Currency: A currency that has decreased in value relative to other currencies.

The Yuan’s Strength and US Trade Policy

The central argument presented is that the continued strength of the Chinese Yuan (CNY) directly contradicts former President Donald Trump’s claims regarding the US-China trade war and tariffs. Trump asserted that China would absorb the cost of US tariffs, a claim predicated on the expectation that the CNY would depreciate significantly. The logic was that a weaker Yuan would offset the impact of the tariffs on Chinese exports, effectively allowing China to “eat” the costs.

However, the video highlights that the opposite has occurred. Instead of weakening, the CNY has strengthened against the US Dollar (USD) throughout the year. This invalidates the original premise of Trump’s strategy. The speaker emphasizes this point, stating that the Yuan’s appreciation demonstrates China is not absorbing the tariffs.

The Double Impact of Tariffs and FX

The video details how this situation actually results in a double cost for the US. Not only are US businesses and consumers paying the imposed tariffs on Chinese goods, but they are also incurring an additional 5% cost due to the strengthening Yuan. This 5% represents the foreign exchange (FX) impact – the increased cost of converting USD to CNY to pay for the tariff itself. The speaker clarifies that this FX impact is on top of the tariff amount.

Challenging the Original Rationale

The core of the argument rests on deconstructing the original rationale behind the tariff policy. The expectation of a weak Yuan was a crucial component of the belief that China would bear the burden of the tariffs. The speaker directly challenges this assumption by pointing to the observed reality of a strong Yuan. The speaker doesn’t explicitly state why the Yuan has strengthened, but implies it’s a market response independent of US trade policy.

Evidence and Supporting Logic

The evidence presented is the observed movement of the CNY exchange rate. The video doesn’t provide specific numerical data on the exact percentage increase of the Yuan, but the consistent assertion is that it has moved up, not down, against the USD. The logical connection is straightforward: if the Yuan was supposed to weaken to offset tariffs, and it instead strengthened, then China is not absorbing the tariff costs.

Concluding Statement

The video concludes with the assertion that “China is winning this trade.” This statement is based on the premise that the US is bearing the full cost of the tariffs, compounded by the additional expense created by the strengthening Yuan. The speaker’s overall perspective is critical of the original trade policy and its underlying assumptions, arguing that it has backfired and resulted in a net benefit for China.