With the sudden depreciation of China’s renminbi, it’s worth looking at the link between currency values and trade agreements. China’s currency last week dropped by a cumulative 4.4% against the U.S. dollar, making Chinese exports cheaper and imports into China more expensive by that amount.
The effect on trade can be substantial. With the U.S. average tariff on industrial goods well under 2%, this change in China’s currency value easily swamps most U.S. tariffs. And given the fact that the U.S. dollar was already strong, this move is an added disadvantage to U.S. exports headed for China compared to exports from other countries.
This has been excerpted from a 19 August 2015 commentary by Alan Wolff of the National Foreign Trade Council and is available in its entirety at:
http://fortune.com/2015/08/19/what-chinas-currency-devaluation-means-for-the-worlds-trade-deals/