China opened up a new front in President Trump's trade war on Monday, sending Wall Street into a tizzy. Basically, China's central bank adjusted the value of its currencydown to its lowest point in over a decade. Investors, fearing President Trump will respond with another tariff escalation, reacted by fleeing stocksfor the safety of bonds and Treasuries — causing the S&P 500 and the Nasdaq to fall 3 percent and 3.5 percent, respectively, by the end of the day. And they're likely right. Yet it's also the case that the low value of the renminbi versus the U.S. dollar really is a problem worth addressing.
So is there any way America can combat China's currency machinations without a tariff war and the ensuing market panic? It turns out, there may be.