Trade war United States is in reality winning

Trade war United States is in reality winning as the growing trade war between the United States and China with Trump administration taking into account $ 100 billion in stringent tariffs as an answer to China’s $50 billion in reprisal tariffs conceals a more vital origin of conflict: China’s wish to subsequently initiate the yuan as a global reserve currency on the same level with dollar.

The dollar’s prominence is intricately connected to international trade. As the value of the dollar rules foremost in the trading system other countries require to gather dollars. The international trade runs on dollars even if United States is not a part of the trade.

The United States was not always so authoritative. Succeeding the 1971 resolution to terminate the link between the value of the dollar and gold reserves, dollar became like any other currency. But in 1974, the United States and Saudi Arabia signed a pact in which Saudis and other Gulf states braced the dollar as the central medium of exchange for oil exports. Therefore oil and other products are assessed in dollars. So any country that purchases oil must expand its dollar reserves to recompense for it, mainly by exporting its goods and services so it can accept dollars as payment.

Once accepted as a global reserve currency, the value of dollar is robust by retained demand for it, and a robust dollar makes American exports high priced for the remnant world.

 

You might also like