The Venezuelan bolivar accelerated its loss against the U.S. dollar as the government faced dollar shortages amid an economic trade war.
The Trump administration’s secondary trade tariff regime on Venezuelan crude is starving the country of foreign currency to inject into the national market, driving these imbalances.
Secondary Tariff Announcement Prompts Steep Venezuelan Bolivar Drop
The Trump administration’s announcement regarding the enactment of secondary tariffs on countries that purchase Venezuelan crude is already wreaking havoc, causing instability in the country’s currency.
The Venezuelan bolivar, which had enjoyed some stability due to the government’s regular injections of dollars into the national market, has accelerated its loss against the U.S. dollar, passing the 100 VES per USD mark recently.
Read more: Trump Debuts ‘Never Before Seen’ Secondary Tariff Strategy Against Venezuela
Analysts regarded this as disastrous for the national economy. Commercial transactions and prices need to reflect this increase, hurting Venezuelans who earn their wages in the national currency.
Alejandro Grisanti, managing partner at Ecoanalitica, stated that there had been an increase in the price of the dollar even before the announcement of the secondary tariffs on national oil. He stated:
“This tightening of sanctions will lead to a reduction in oil production, an economic recession with a sharp increase in the dollar and inflation.”
“We have to wait for the final publication of the licensing regime to be able to quantify the effect of this tightening on the economic variables,” he added.
This, and the finalization of the extractive activities of the U.S. oil giant Chevron in Venezuela, are hurting the capacity of keeping the local currency stable, given the high level of public spending of the government.
Nonetheless, Trump’s secondary tariff announcement has put the U.S. on a collision course with China and Spain, two of the largest purchasers of Venezuelan crude, even as oil shipments have stalled in anticipation of this measure.
China’s Foreign Ministry Spokesperson, Guo Jiakun, criticized this move, stating that it is part of the U.S. abuse tradition of using “long-arm” jurisdiction to interfere in the internal affairs of other countries. “We urge the U.S. to cease its interference in Venezuela’s internal affairs, lift its illegal unilateral sanctions against Venezuela, and take steps that contribute to peace, stability, and development in Venezuela and beyond,” he stressed.
It remains to be seen whether Trump will back down on these resolutions as he has done many times before, or if these will be finally implemented on April 2.
