Soc Gen: Here's Why The U.S. Can't Make China Revalue Like They Did Japan

Soc Gen have warned that it won’t be as easy this time around for the U.S. to reign it its deficit creating trade partner as it was in the 1980s.

In that scenario, it was the U.S. dealing with Japan. Check out how massive the trade deficit was then.


Photo: Societe Generale

Certainly not tiny, and certainly on scale with the U.S.-China deficit now.

Then, the U.S. was able to muscle Japan into agreeing to revalue the yen for three reasons, according to Soc Gen.

  • Japan was over reliant on the U.S. export market for its automobiles.
  • Japan didn’t have an inflation problem.
  • Japan and the U.S. had a strong “security relationship.”

Just take a look on the Japanese transport equipment export dependency on the U.S. in the 1980s. China doesn’t have this problem and, as Soc Gen point out, exports more to the EU than the U.S.


Photo: Societe Generale

So, with China concerned about rising domestic deflation, having multiple export partners, and lacking any tight security bonds, the yuan revaluation is going to be much more of a struggle.

Societe Generale explains the entire state of the world economy in 11 charts >

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