WASHINGTON (AP) — China decided Monday to meet President Donald Trump’s latest tariff threat with defiance, letting its currency drop to an 11-year low and halting purchases of U.S. farm products.
The moves, which came four days after Trump threatened more taxes on Chinese imports, knocked stock markets worldwide into a tailspin. On Wall Street, the Dow Jones Industrial Average was down more than 850 points by mid-afternoon.
Earlier, stocks tumbled from Shanghai to London on fears the escalation in U.S.-China trade tension will drag down a global economy that is already weakening.
Raising worries that China will wield its currency as a weapon in a trade war, Beijing let the Chinese yuan weaken to the politically sensitive level of seven to the U.S. dollar for the first time since February 2008.
After financial markets closed Monday, the U.S. Treasury Department announced that it was labeling China a currency manipulator for the first time since 1994.
Also Monday, China’s official Xinhua news agency reported that Chinese companies have stopped buying U.S. farm products — a direct shot at Trump supporters in rural America.
Together, the currency devaluation and suspension of farm purchases suggest that China has decided to stand tough, rather than cave in Trump’s threats.
“The Chinese side won’t submit to the US,” tweeted Hu Xijin, editor-in-chief of China’s hardline Global Times newspaper.
The weaker yuan makes Chinese exports less expensive in foreign markets. It also helps offset the impact of U.S. tariffs on Chinese products.
The Chinese currency hit 7.0391 to the dollar by late afternoon, making one yuan worth 14.2 cents. The level of seven to the dollar has no economic significance but carries significant symbolic weight.