China's Currency Devaluation: The First Domino To Fall In A Coming Trade War?

By Justin Kirschner

China must tread carefully in managing their recent currency devaluation or else they could start a trade war says Bruce McCain, Chief Investment Strategist for Key Private Bank. The chance of China setting off a chain reaction of retaliation is not great, McCain predicts, because China is moving towards a more market-based, less arbitrarily pegged currency value.  That will seem fairer to its trading partners, he argues, who also let their currency values float. But retaliation may nonetheless be in the cards.  With many countries holding excess export capacity with China, home to a market of eager potential consumers, other countries may deploy economic antidotes to China’s devaluation in order to realize their own export potential.