China’s Yuan Slips To 4-Month Low On Trump's Tariff Threat

Yuan Weakens: The Chinese Yuan fell to its weakest level against the US dollar in nearly four months following statements by US President-elect Donald Trump regarding significant tariff increases on imports from China, Mexico, and Canada. Trump pledged a 25 per cent tariff on goods from Mexico and Canada and an additional 10 per cent on Chinese imports, sparking concerns about escalating trade tensions.  

In offshore markets, the yuan (CNH=D3) declined approximately 0.3 per cent to 7.2730 per dollar, its lowest since 30 July. Meanwhile, the onshore yuan (CNY=CFXS) opened lower at 7.2524 per dollar.  

Ahead of trading, the People’s Bank of China (PBOC) set the midpoint rate (CNY=PBOC)—the central reference for the yuan’s 2 per cent trading band—at 7.1910 per dollar. This was 450 pips stronger than a Reuters forecast.  

Yuan Under Pressure During Trump’s First Term

The yuan experienced a 5 per cent depreciation against the dollar during Trump’s initial presidency, primarily due to tariffs imposed on Chinese goods in 2018. It weakened an additional 1.5 per cent in 2019 as trade tensions deepened.  

Trump’s recent election campaign focused heavily on boosting American manufacturing, with promises to implement tariffs of 60 per cent or more on Chinese imports. Analysts predict these measures, coupled with policies such as tax cuts, could fuel inflation and maintain elevated US interest rates, putting additional strain on the currencies of US trading partners.
 

(With Reuters inputs)

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