Whether Exchange Rate Could Trigger Trade War

Recently, in a long time the global debate about currency issues. On one hand, the developed countries such as Europe, American, Japan and so on developed countries in order to stimulate weak domestic economy, separately launched new round of quantitative easing, namely when interest rates fall bottom, through central Banks directly buy all kinds of financial products, inject market liquidity, which will undoubtedly result in developed countries currencies weak; on the other hand, for export decline and capital inflows concern, many emerging market countries, including the central bank and Japan bank began largely meddle foreign exchange market, try best to curb domestic currency to developed countries’ currency appreciate significant.

Developed countries want to let their currency devaluation to boost exports, emerging market countries would not like let currencies on developed countries currency to rise in order to stable export. The exchange rate competitive devaluation risk enlarges, the global currency war risk highlights.

Global currency war risk lies in the global financial crisis outbreak, the global total demand greatly shrink. Developed countries trying to through currency devaluation reduce import; and emerging market countries in short-term boost domestic demand is difficult, they are trying to through stable currency exchange rate to stable domestic exports. Therefore, to the global demand dispute promoted global currency dispute upgrade.

The global exchange war has in global war risk. Just imagine that in developed countries pursued devaluation, developed countries are hard to realize through the currency devaluation improved the net exports, they inevitably will with more direct and tough measures, namely directly enforce import restrictions, such as for emerging market countries import commodities implement anti-dumping, anti-subsidy and impose punitive tariffs and so on. Developed countries protectionist measures in turn leads to emerging market countries take the measure. Both parties implemented of import restrictions policy result, maturely is the global free trade has significant damage, exchange rate war changed to trade war.

Avoid disputes in the international cooperation and exchange reach the main obstacle, led by the United States in developed countries trying to adjust the burden of all transfer to emerging market countries. American attempts to reach a square agreement, persecute emerging-market currencies raise sharply. Due to its currency to rise sharply will caused significant impact on trade and asset prices. Therefore, the emerging market countries will flatly refused to unilateral adjustment measures. If developed country goes on its own way, the exchange rate was and trade war is inevitable.

The major countries, including primary deficit and surplus country for the global economy should make their own contribution to balance. Deficit countries should improve their savings rate; make domestic currency appropriate and stable evaluation. All countries should avoid international main exchange rate drastic fluctuations; at the same time actively enforce domestic structure adjustment. Only the mutual understanding and trust, and international coordination and cooperation can avoid exchange rate war and trade war.