The Australian dollar has reached a minimum of five years since the two largest economies in the world increase tariffs on each other, creating uncertainty in the market.
The Australian dollar fell to its lowest point since April 2020, buying only 60.5 cents of US.
The fall follows an intensifier which saw Beijing give an additional rate of 34 percent over all imports from the USA on Friday in retaliation due to similar American taxes.
So why is the Australian dollar falling?
The porcelain effect
Tariffs between the United States and China have increased since the inauguration of the president of the United States, Donald Trump, in January.
But now the broader American tariffs against China’s key economic allies are causing instability for their currency.
The macroeconomist Janet Mui said that China faces “critical” economic struggles.
“China has been trying to diversify its supply chains through Southeast Asia to avoid US tariffs, but now that cannot happen,” he told Reuters.
The Australian dollar is widely considered an indicator of Yuan, because our exports depend on China’s purchasing power.
The chief economist of the Institute of Australia, Greg Jericho, told SBS News that the two coins are linked, which means that when Yuan receives a blow, the Australian dollar can affect.
Drip impact
“Donald Trump raising tariffs on Chinese imports to the US
How are consumers affected?
A weak Australian dollar makes imports more expensive, which can make things difficult for domestic budgets.
Jericho said that this significantly affects gasoline prices, which depend completely on global markets.
Other imported household items, in some non -essential items, could also increase the cost, but there should not be changes in things such as rates and charges, rent and care of children.
Additional reports from the Reuters Press Agency
