One of Xi’s options is to weaken the yuan before Trump can devalue the dollar. China’s economy has had a rocky 2024, as dueling crises in property, local-government finances, and weak consumer demand fuel deflation. Nothing would hasten growth faster than weaker exchange rates. Or, it follows, offset the 60% tariffs Trump threatens to slap on Chinese goods.
Xi could restrict exports of key inputs Trumponomics will need to thrive. Surely, Elon Musk and his Silicon Valley bros can explain to Trump the risks of depriving the U.S. of rare earths and other materials. Less access to gallium, germanium, graphite, and other ingredients would rock the semiconductor, telecommunications, and electric-vehicle industries.
Chinese leaders could sell large blocks of Beijing’s $730 billion of U.S. Treasuries. They could target companies most on the frontlines of decoupling tensions. What’s to stop Xi from taxing or even seizing assets of Apple, Microsoft, Tesla, and others? Or slapping taxes on Amazon, Walmart and others.
Finally, Trump is allowing China to position itself as the protector of free trade and globalization in 2025, while MAGA tries to drag markets back to 1985. Ironically, that will only lead to stepped up efforts by the BRICS nations—Brazil, Russia, India, China, South Africa—and the “Global South” to replace the dollar in trade and finance.
~ William Pesek, Barron's.com, December 3, 2024
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