We’re still concerned about the structural integrity of emerging market currencies, many of which have fallen again after rebounding slightly in recent weeks. Turkey led the way again. The lira fell 2.3 percent on the dollar on Thursday. Turkish President Recep Tayyip Erdogan eliminated a 10 percent withholding tax on lira deposits of up to one year to stem the lira’s latest fall, and though this appears to have worked, leading to a 1.2 percent rebound on Friday, it is only a temporary solution. The lira is down 8.2 percent on the week overall. Argentina’s peso is also struggling, dropping 13 percent on the dollar on Thursday and necessitating Argentina’s fifth interest rate hike since April. The government announced that a new raft of measures would be revealed on Monday to stem the peso’s decline and curb inflation. The Chilean peso and Brazilian real were also down on the dollar on Thursday – 1.8 percent and 1 percent, respectively. Brazil announced it would be intervening in the market with roughly $2 billion to roll over short-term debt maturing on Sept. 5.

The U.S. may soon launch its newest trade war salvo against China. Bloomberg reports, citing unnamed sources, that the U.S. could levy new tariffs against $200 billion worth of Chinese goods. That’s roughly 10 percent of China’s total global exports – and 46 percent of its total exports to the U.S. last year. It would appear, then, that recent low-level U.S.-China negotiations did not go well. China, meanwhile, is busy attempting to shore up its economy. On Thursday, the Chinese State Council announced a tax cut for businesses affected by capacity cuts as well as for smaller companies. China was caught off-guard when the U.S. followed through on its trade threats earlier this year, but Beijing is already preparing for this latest escalation. Its balancing act is getting harder – but then, an external enemy is often a good thing for unity.

Honorable Mentions

  • Both Afghanistan and China have strongly denied that the two sides reached an agreement for China to build a military base in Afghanistan.
  • U.S. and Canadian trade officials remain upbeat on negotiations, but the U.S. deadline for reaching a deal is Friday.
  • A Catalan newspaper claims the regional president is putting the finishing touches on a plan that involves giving Spain an ultimatum on granting Catalonia independence.
  • Iran’s Foreign Ministry has told France, and the world, that Iran is not interested in negotiating on its ballistic missile program. Meanwhile, the International Atomic Energy Agency said Iran was continuing to abide by the terms of the nuclear deal even after the U.S. withdrawal.