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The specter of a global currency war scenario has dominated the world since Donald Trump came to the White House in January 2017.
A currency war usually occurs when a country buys other currencies on a large scale, such as the dollar, for example, in order to maintain its cash at a very low rate and thereby enhance the competitiveness of its exports. In this process, other countries interact by imitating them, dragging the world into a cycle of competitive cuts where there is no winner.
"A war like this would be devastating and would undermine the entire international trading system," warns Osama Al Rahma, a senior vice president of a group of banking and financial institutions in Dubai, in an interview with Arab Independent. "The last thing we want to see is to engage in a direct currency war, especially as the world has gone through it in the past and its negative repercussions on the entire economy," he said. "That is why the world's leaders under the G20, In order to avoid wars between countries. "
"The war of currencies, if it breaks out, will have two new features this time," said Dr. Maggie Kris, an international trade professor at the University of Oxford at the University of Oxford, who told the Economist that "it will not only involve the war of the currency of the economic contenders but also the allies, The European Union's biggest partner, deliberately manipulates the euro exchange rate. In practice, this kind of war will be very fierce and it will be difficult to imagine any alliances in it if the global economy descends and the total cost will be very high. "
As for the other aspect of the war, Chris adds, "Previous perceptions that emerging economies may emerge from that war have made tangible gains from the wrangling of adults are illusory. Emerging economies may be the biggest losers. Severe blows to emerging economies.
Indeed, the addition of the United States of Singapore, Malaysia and Vietnam to the list of potential currency manipulators has raised the concerns of most economic officials in these countries, and even the concern of many international companies.
"Most of the leaders of these countries thought they would emerge winners of the US-China trade dispute, and international companies investing billions in China would shift their investments to those countries after deteriorating trade relations with Washington and raising customs duties between the two countries, The American list revealed to the leaders of those countries and international companies, that the US administration will put pressure on those countries, making investment in risky.
However, we can say that putting those countries on the US watch list does not mean that they will be penalized, but there is additional pressure on them.
One of the main side effects of a currency devaluation is the increase in the price of imported products, which harms purchasing power. Countries whose growth depends on domestic consumption, such as the United States and China, are not a big problem. But it does not apply to other countries in the world. With regard to the euro, in 2015, like Japan, the European Central Bank began to buy public debt in a hurry, in order to reduce borrowing rates and address inflation. However, since these purchases were financed through the printing of currencies, this contributed to the increase in the amount of the euro traded, and thus reduced its price. However, this effect is indirect and can not be spoken here on the manipulation of the European currency.
If the price of the dollar rises, it will be very bad news for the US president as it entails a decline in the competitiveness of US exporters with Trump just campaigning for a second term in 2020, the Monte Carlo website reported.
The president, in a show of his presidency, boasted the restoration of US trade power against China, as well as Europeans threatening to impose heavy tariffs that would be a severe blow to the auto industry.
At a time when the United States is one of the longest economic growth cycles in its modern history, Trump is determined to get federal help to extend this period as long as possible.
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