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Sanctions vs interest rates

Donald Trump apparently decided to rewrite the story. He declared “war” against almost all major economies in the expression of sanctions, charges or other restrictions on trade with the United States. In principle, if the United States was a thirdworld country with low capacity, it would not be a problem. Just that the United States is the largest economy in the world and has a huge impact on the world economy and trade.

So .. to make a quick review. The United States withdrew from the TPP (Trans-Pacific Partnership), re-examining NAFTA, imposing sanctions on North Korea, on the brink of a trade war with China … there are probably more but we still do not yet know about them.

Well, what can the parties face against the penalties of Trump … will support their currency so they can neutralize the decrease in the amount of cash and capital flows to their country with a higher value of the currency.

Turkey, for example, today raised its credit rate by 3%. TRY is the lowest performing currency against the dollar this year. For 6 months, the decline of TRY versus USD was 14%.

China, who are the main victims of the imposition of these sanctions, are known to be among the countries with the most dollar reserves. Also, the central bank may fixate the CNY’s exchange rate against the US dollar, which in practice means that even the US would impose taxes on imported goods from China, the country would have to pay CNY higher than before the sanctions. Thus, China will be able to balance the value of its CNY in international currency exchange.

 



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