TURMOIL has become a commonplace of financial markets in recent summers. This one is no different. An unexpected devaluation of the yuan this week fuelled fears about the state of China’s economy, setting off falls in commodities and emerging-market currencies. Stockmarkets in Europe and America wobbled. Copper hit a six-year low; oil is below $50 a barrel; Malaysia’s currency is at its lowest level since the Asian crisis in 1998. Even Canada is flirting with recession.

No single factor can explain everything that is going on. But two countries, and the relationship between them, provide a framework for understanding these gyrations. America is still the world’s biggest economy and sets the tone for interest rates and currencies globally. China has been the fastest-growing big economy by a distance. These two behemoths are pulling in different directions. America’s recovery is gradually gathering pace, while China’s economy is slowing sharply. This divergence is causing trouble, particularly for those emerging markets which have lived the high life on China’s investment boom and on a flood of cheap credit from America. And there is worse to come.

Start with America, where GDP has picked up after a wobbly first quarter and all signs point to more solid growth. Employers, excluding farms, added 215,000 people to the payroll in July, a hefty increase in line with the recent monthly trend. The jobless rate is inching down towards 5%.

Healthy growth in the world’s largest economy is good news. But it is bringing closer—perhaps as soon as September—the moment when the Federal Reserve raises interest rates for the first time in almost a decade. That prospect has pushed up the dollar, which has risen by 15% against its trading partners in the past two years. And it has squeezed emerging markets in two ways. First, capital is drawn towards higher-yielding American assets, rather than being invested at home; and, second, corporate borrowers in the developing world face currency risk on the $1.3 trillion of dollar-denominated bonds they have issued since 2010. According to the Bank for International Settlements, the heaviest such borrowers are in China itself, Brazil, Russia, Mexico and South Korea.

As America’s economy gathers steam, China’s is losing it. Alarming figures published this week showed an 8% fall in Chinese exports in July and a 5.4% drop in factory-gate prices. Output prices have fallen for 41 straight months, a symptom of overcapacity in much of China’s heavy industry.

Some of the slowdown in China’s economy is both inevitable and welcome, reflecting as it does the transition from an investment-led economy to a consumption-centred one. But for many emerging markets it is painful nonetheless.

The impact of China’s slowdown is greatest for commodity producers, from Brazil to South Africa. But it is not confined to them. GDP growth in Singapore, a bellwether of the world economy, has slowed to below 2%, the lowest rate for three years. Surveys of purchasing managers suggest factory output is contracting in Taiwan and Korea. Even inflation-prone India, which is far less tied to China than its neighbours are, is feeling the pinch. Its steelmakers moan about a surge of cheap Chinese imports. The relentless downward pressure on factory-gate prices in China forces industry in neighbouring countries to follow suit or lose market share.

The divergence between America and China has also complicated the relationship between them. Until this week, the yuan’s loose peg to the dollar meant that it had been aping the greenback’s ascent even as its own economy has slowed: China’s trade-weighted exchange rate has risen by more than 10% since the start of 2014. Hence fears that this week’s devaluation presages a determined effort to drive down the value of the yuan to benefit Chinese exporters—and squeeze other emerging markets all the more.

Those fears are overblown. The government in Beijing is not about to start a currency war. The initial 2% devaluation of the yuan only undid the previous ten days’ worth of appreciation in trade-weighted terms. The changes made by the Chinese central bank to the exchange-rate regime were designed in part to strengthen the role of market forces in determining the value of the yuan. Fear of capital outflows makes policymakers wary of sustained depreciation.

A feeling that something ain’t right
Similarly, the Fed’s rate-setters will not want to act too abruptly. They care about the strength of the dollar. The yuan’s fall this week prompted declines in other Asian currencies against the greenback. Having readied the markets for an increase this year, it may now be hard for the Fed to back away. But the turmoil this week makes it more likely that the rate-setters will move as gently as they can. That is some comfort for emerging markets, but not much. The lodestars of the global economy are moving apart, spelling more trouble ahead.