4 ms·

so if there’s a chinese product that i like and it costs 100 yuan before devaluation, and say 1 dollar == 100 yuan. after devaluation, the product might cost 15

so if there’s a chinese product that i like and it costs 100 yuan before devaluation, and say 1 dollar == 100 yuan. after devaluation, the product might cost 150 yuan but now 1 dollar == 150 yuan. so my dollar still buys the same amount of goods. what am i missing?

dsalso 7y ago
Not exactly, it depends on the particular good. The price in yuan could stay 100 or not move as much. In that case your purchasing power has increased
- jermaustin1 7y ago
  So its a great thing for the US if we want to import more stuff? So its basically saying: I see your 10% Tariff and raise you a 10% discount!
  - internet_user 7y ago
    great for consumers, devastating for the whatever hobbled manufacturing base left in the US.
  - skybrian 7y ago
    Pretty much, although with more revenue for the US government.
  - jeremy_wiebe 7y ago
    But doesn’t that also raise Chinese import costs the same amount? Or is that where Chinese tariffs in the things they import come into play (like Canadian canola, etc)? This feels like a sort of race to the bottom.
- voodooranger 7y ago
  in the aggregate if you devalue a currency so that it’s worth half of what it was, won’t prices in that currency double?
ceejayoz 7y ago
https://www.nytimes.com/2019/08/05/business/china-currency.html https://www.nytimes.com/2019/08/05/business/china-currency.h... See the section titled "How would that help China? > Say you own a Chinese factory making lawn ornaments, and you sell a lot of pink flamingos to an American retailer. You price each at $1 — they may sell for far more in retail outlets in the United States, but shipping and storage account for most of that. When the renminbi is 6 to the dollar, that translates to 6 renminbi in sales. > But when the currency depreciates to 7 to the dollar, that $1 flamingo is worth 7 renminbi in sales to you. Or you can cut the price — say, from $1 to 85.7 cents — and still make your original 6 renminbi in sales. Your American competitor, who has to buy and sell in dollars, has to grudgingly cut prices to compete.
internet_user 7y ago
Exactly. This means US consumers will now have 50% discount on all Chinese goods, or a 50% tax on exactly the same US goods. Terrible for US manufacturing.
joshlegs 7y ago
this also means that people in china cant afford products from the US, and China is a major consumer of goods, especially for large sectors of our agribusiness. Also the fact that their yuan is worth less now is increasing uncertainty in the markets, and stocks dont like uncertainty, hence the sellof.
IAmGraydon 7y ago
It’s devalued in relation to other currencies. In China, 100 yuan still = 100 yuan. So your 1 dollar gets you 50% more than it used to (going by your example).
rdtwo 7y ago
Effect is not immediate as most contracts are still written in USD. But the producer would still be paying wages in yuan so that many actually be a short term profit boost
krona 7y ago
> what am i missing? The impact of exporting deflation across the global economy right at the moment it needs it the least. I'm looking specifically at the euro area, and what it does next.
DeonPenny 7y ago
It means that basically the tarriffs have been wiped out and chinese savings took the hit.
belltaco 7y ago
You have it backwards. Lets assume that Chinese product does not have any US tariffs. So it costs 100 yuan = 1$. After devaluation, it will cost 50 yuan = 50 cents. When tariffs hit, you pay 50 cents to the US treasury to import it, so it's back to $1. In the next case, lets assume the tariffs hit first. Tariff of 50% makes the import cost $1.5, so China devaluation puts it back at $1 effective to you, after the tariffs you pay.
belltaco 7y ago
What you're missing is that the tariffs are meant to make the local manufacturers's similar product being sold at $1.25 more price competitive to you, but the devaluation will nullify that. So it's a war between tariffs and devaluation.

dsalso 7y ago

Not exactly, it depends on the particular good. The price in yuan could stay 100 or not move as much. In that case your purchasing power has increased

jermaustin1 7y ago
So its a great thing for the US if we want to import more stuff? So its basically saying: I see your 10% Tariff and raise you a 10% discount!
- internet_user 7y ago
  great for consumers, devastating for the whatever hobbled manufacturing base left in the US.
- skybrian 7y ago
  Pretty much, although with more revenue for the US government.
- jeremy_wiebe 7y ago
  But doesn’t that also raise Chinese import costs the same amount? Or is that where Chinese tariffs in the things they import come into play (like Canadian canola, etc)? This feels like a sort of race to the bottom.
voodooranger 7y ago
in the aggregate if you devalue a currency so that it’s worth half of what it was, won’t prices in that currency double?

ceejayoz 7y ago

https://www.nytimes.com/2019/08/05/business/china-currency.html https://www.nytimes.com/2019/08/05/business/china-currency.h... See the section titled "How would that help China? > Say you own a Chinese factory making lawn ornaments, and you sell a lot of pink flamingos to an American retailer. You price each at $1 — they may sell for far more in retail outlets in the United States, but shipping and storage account for most of that. When the renminbi is 6 to the dollar, that translates to 6 renminbi in sales. > But when the currency depreciates to 7 to the dollar, that $1 flamingo is worth 7 renminbi in sales to you. Or you can cut the price — say, from $1 to 85.7 cents — and still make your original 6 renminbi in sales. Your American competitor, who has to buy and sell in dollars, has to grudgingly cut prices to compete.

internet_user 7y ago

Exactly. This means US consumers will now have 50% discount on all Chinese goods, or a 50% tax on exactly the same US goods. Terrible for US manufacturing.

joshlegs 7y ago

this also means that people in china cant afford products from the US, and China is a major consumer of goods, especially for large sectors of our agribusiness. Also the fact that their yuan is worth less now is increasing uncertainty in the markets, and stocks dont like uncertainty, hence the sellof.

IAmGraydon 7y ago

It’s devalued in relation to other currencies. In China, 100 yuan still = 100 yuan. So your 1 dollar gets you 50% more than it used to (going by your example).

rdtwo 7y ago

Effect is not immediate as most contracts are still written in USD. But the producer would still be paying wages in yuan so that many actually be a short term profit boost

krona 7y ago

> what am i missing? The impact of exporting deflation across the global economy right at the moment it needs it the least. I'm looking specifically at the euro area, and what it does next.

DeonPenny 7y ago

It means that basically the tarriffs have been wiped out and chinese savings took the hit.

belltaco 7y ago

You have it backwards. Lets assume that Chinese product does not have any US tariffs. So it costs 100 yuan = 1$. After devaluation, it will cost 50 yuan = 50 cents. When tariffs hit, you pay 50 cents to the US treasury to import it, so it's back to $1. In the next case, lets assume the tariffs hit first. Tariff of 50% makes the import cost $1.5, so China devaluation puts it back at $1 effective to you, after the tariffs you pay.

belltaco 7y ago

What you're missing is that the tariffs are meant to make the local manufacturers's similar product being sold at $1.25 more price competitive to you, but the devaluation will nullify that. So it's a war between tariffs and devaluation.