US Treasury Designates China Currency Manipulator, Spurs Trade War Betting Odds
Posted on: August 6, 2019, 10:11h.
Last updated on: August 6, 2019, 11:59h.
The United States Treasury has officially designated China a currency manipulator, and the ongoing trade war between the world’s two largest economies is threatening global markets, as well as the odds on the 2020 US presidential election outcome.
On Monday, Treasury Secretary Steven Mnuchin said after reviewing the yuan exchange rate to the US dollar, the department concluded that the People’s Republic of China is indeed manipulating its currency.
Betting on the outcomes of political events is largely illegal in the US, with one exception being the online exchange PredictIt. The platform has been issued a “No Action” letter by the US Commodity Futures Trading Commission since its data is used for educational purposes, and the site imposes betting limits.
One PredictIt market asks, “Will the US label China a currency manipulator in 2019?” While it might seem like that has already occurred, the market rules state that for “Yes” shares to be redeemed at $1, the Treasury must issue a report to Congress by year-end detailing evidence that China meets the manipulation standard.
“Yes” shares are currently at 73 cents.
He Said, They Said
Mnuchin said he must “consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” He added that Treasury will now engage the International Monetary Fund (IMF) to “eliminate the unfair competitive advantage created by China’s latest actions.”
In response, China’s central bank said, “The United States disregards the facts and unreasonably affixes China with the label of ‘currency manipulators,’ which is a behavior that harms others and oneself.”
The trade tensions rattled stock markets around the world yesterday. The Dow Jones, NASDAQ, and S&P 500 all fell around 3 percent.
If China and the US aren’t able to reach a trade deal soon, the ongoing tariff war will continue to dampen market sentiment. That won’t be good for President Donald Trump, who has routinely touted a robust economy under his administration.
As of now, it’s not impacting 2020 odds. PredictIt shares of Trump winning reelection are holding steady at 46 cents (no change). Former VP Joe Biden is next at 19 cents (no change), and Sen. Elizabeth Warren (D-Massachusetts) third at 13 cents (down one cent).
However, Goldman Sachs says a deal between the US and China is unlikely before the 2020 election.
Predicting Trade Outcome
Trump has further threatened China with a 10 percent tariff on $300 billion worth of US imports from the People’s Republic effective Sept. 1. The new tariffs would target various goods including apparel, footwear, and electronics.
PredictIt asks which side will be the victor at the end of 2019 in terms of the value of goods traded between the two countries. The strong favorite is China.
“Will US have a monthly trade surplus with China by year-end 2019?” has “Yes” shares at just three cents. According to the Census Bureau, the United States between January through June 2019 has imported $219 billion worth of products from China, while exporting only $52 billion to the People’s Republic.
In 2018, imports from China totaled $539.6 billion, to $120.1 billion in exports – a $419 billion trade surplus in China’s favor.
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