How Devaluation of Yuan Affects U.S. Importers & Exporters
According to Bloomberg, this week, China devalued its yuan currency by 2.8 percent to combat a slowdown of the world’s second-largest economy. Given that China is one of the United States’ biggest trading partners, the devaluation will affect both imports and exports for both countries. The devaluation of yuan was spurred by China’s slowing exports, property markets, as well as their labor market.
China is growing at a slower, more moderate pace and will continue to do so for the next several years. The devaluation of yuan by the Chinese government is meant to allow the market to affect its value to remain competitive within the global marketplace.
What it means for U.S. exporters:
U.S. goods will be more expensive for Chinese consumers to buy versus domestic products – hurting U.S. exports. China’s focus will be to encourage the sale of domestic products in an effort to stimulate its economy.
What is means for U.S. importers:
Goods produced in China will be less expensive, however origin charges will increase from a total landed cost perspective. This may lessen the impact of proposed PSS surcharges set to go into effect in September.
The devaluation of yuan won’t likely be an overnight cure to stimulate or correct the Chinese economy. Thus, U.S. importers and exporters will need to monitor the marketplace to effectively buy and sell their products.
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