If Trump imposes larger tariffs, the renminbi and US currency pegs will come under pressure
The writer is a senior fellow at the Brookings Institution and a former chief economist at the Institute of International Finance The US election may be the start of a massive dollar rally, but markets have yet to realise this. In fact, without much clarity on what is coming, markets are currently doing a retread of price action after Donald Trump’s 2016 win.
Currencies across Asia will fall in tandem with the renminbi. That in turn will drag down emerging markets currencies everywhere else. Commodity prices also will tumble for two reasons. First, markets will see a tariff war and all the instability that comes with it as a negative for global growth. Second, global trade is dollar-denominated, which means emerging markets lose purchasing power when the dollar rises.
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