While China commands the media spotlight in the global war on trade, new trade battles are being waged south of the equator. On Monday December 2, 2019, President Trump announced that he would reinstate tariffs on aluminum and steel imports from Argentina and Brazil amid accusations that those countries have been engaging in a massive devaluation of their currencies. The President's announcement, which came via Twitter, also urged the Federal Reserve to take measures to counter foreign currency devaluation, which negatively impacts US manufacturers and farmers ability to fairly export their goods.
Details of the new mandate are unclear as the White House has yet to release an order explaining the changes. Although the US started imposing global tariffs of 25% on steel and 10% on aluminum in 2018 on countries such as China, certain countries, including Brazil and Argentina, were quick to negotiate exemptions from the tariffs in the form of duty-free quotas. The President's mandate comes on the heels of softening economies and weaker currencies in Brazil and Argentina, which has the effect of making farm goods in those countries cheaper than US farm production.
Accusations of currency devaluation are nothing new to international trade disputes, as the US has long accused China of devaluing its currency in order to bolster its own economy. Currency devaluation involves taking measures to strategically lower the purchasing power of a nation's own currency. A weak domestic currency makes a nation's exports more competitive in global markets, and simultaneously makes imports more expensive. With higher export volumes spurring economic growth, many countries are tempted to lessen the purchasing power of its domestic currency.
Whether this practice is actually taking place in Brazil and Argentina is open for debate. Neither Brazil nor Argentina has been identified as currency manipulators in the recent US Treasury Department currency...