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letting its currency depreciate. Arguably, the -9% fall in the renminbi’s value against the US dollar between April and August has already neutralized the effect of a 10% tariff on half of China’s exports to the US. A bit more depreciation can take care of a broadening of the tariff base or a hike in the tariff rate. In the longer run, US efforts to close off its markets and stem the flow of its technology will increase the incentives for Chinese firms to become more competitive by intensifying their own technology investments. There is evidence that this is already happening. - Evergreen GavekalChina, by contrast, can offset the short-term hit to its competitiveness by