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What’s the story behind the drop in stock market?

The US Treasury Department placed China on a blacklist Monday evening, officially labeling China as a “currency manipulator” after the regime took a major step that sent shockwaves through global stock markets. That official label could allow the US government to punish China with new sanctions.

READ: Why China is losing the trade war

After the communist country devalued its own currency, US stock markets dropped significantly in terms of points but not necessarily as a percent of its overall size. The Dow Jones Industrial Average dropped 767 points or roughly 2.9 percent. The S&P500 also sank by 87 points or 3 percent and the Nasdaq fell more than 278 points or 3.47 percent. While media reports stated the drop was catastrophic, it was only the 14th largest percentage decline of the last 19 years.

As stock prices sank on Monday, President Trump blasted away at the Chinese government saying, “China dropped the price of their currency to an almost historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Trump has been accusing China of unfair trade practices, and the regime retaliated by allowing the value of its currency to plunge to its lowest level compared to the US dollar in more than a decade.

By allowing its currency to decrease in value, Chinese goods will now be cheaper for other countries to buy. It’s a way for China to attempt to bypass the trade tariffs and keep selling its goods overseas.

The Associated Press explains that the cheaper value of the yuan “hurts U.S. manufacturers, which have already been hit by the slowing global economy. It also adds more downward pressure on inflation, which some economists worry may be edging toward too weak. In the worst case, falling prices encourage people and companies to hold off on buying things, which starts a vicious cycle of less and less economic activity.”

President Trump offered this assessment: “China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!”

“China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the U.S. with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago!”

Investors are worried that Trump’s strategy of using tariffs to try and force China to level the playing field will damage the global economy. The US and China have engaged in negotiations to end the tariffs, but China has been dragging its heels, striking back with its own tariffs and now dropping the actual value of its own money to compensate. Trump has stated he believes the regime is just hoping he’ll be defeated in 2020 so they can negotiate with a new president who won’t be tough on them.

For now, experts say the US economy is still relatively strong, unemployment is at its lowest rate in half a century, and US stocks just reached record highs last month.

–CBN News

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