As developments around the trade war between the US and China are getting most of the media attention, a currency war is brewing underneath which could exacerbate the situation further. US President Trump insists that China and the EU are manipulating their respective currencies in order to maintain a trade advantage over the US. Reuters published an interview yesterday where Trump stated 'I think China’s manipulating their currency, absolutely.

The trade war between the US and China is in its early stages and many compare it more than a conflict for the time being. The risks that it will turn into a longer lasting, full blown trade war are increasing daily as rhetoric is on the rise. US President Donald Trump now asked the United States Trade Representatives Office, tasked with identifying another $200 billion worth of Chinese imports for tariffs, to increase the proposed tariffs from 10% to 25%.

Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a country's currency falls so too does the price of exports, and Imports to the country become more expensive.