Sunday, October 10, 2010

Approaching Trade War Threatens Logistics Sector

(Transport Intelligence – Thomas Cullen)

“A currency war” is how the finance minister of Brazil described the competitive devaluation between major economies over the past year. Particular attention has been paid to the Chinese currency peg to the dollar, yet a number of nations are busy selling their own currency. Switzerland, Japan and South Korea all have huge trade surpluses yet have moved to depress the value of their currency.

This sort of behaviour has provoked the anger of the US. A bill is now moving through Congress that is designed to impose sanctions on the Chinese in order to retaliate. The US Treasury Secretary Timothy Geithner has just described China’s currency policy as a “dangerous dynamic”. Even comparative neutrals such as Dominique Strauss-Kahn at the IMF and Robert Zoellick at the World Bank have criticised the Chinese over their currency strategy and the role it plays in the huge imbalances of trade. Some form of trade conflict seems likely.

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