A new round of trade tensions between the US and China has escalated with Beijing imposing a blanket tariff of 84% on all goods from the U.S., triggering immediate repercussions in global currency markets. The yuan has plummeted, reaching its lowest level since late 2007 as a result of these retaliatory measures. 50% tariffs imposed by the US on Chinese goods earlier this week served as the trigger for Beijing’s response. President Trump’s escalation of tariffs on Chinese imports to 125%, in turn, sparked the yuan’s historic plunge.
China’s economic slowdown adds to these challenges, with deflationary pressures persisting and domestic demand weakened by trade friction. This has prompted China to take urgent action, including an emergency meeting where top officials discussed policy options. The People’s Bank of China (PBOC) set a lower midpoint rate for the yuan, signaling Beijing’s intentions to contain currency depreciation. Notably, despite these attempts, both onshore and offshore yuan values have fallen more than 1% in April.
Despite this situation, market analysts observe that China may seek alternative methods to exert pressure on the US beyond trade negotiations. This strategy includes targeting services sectors where America holds a significant advantage, like finance and consulting. The escalation of tensions is raising concerns about potential economic repercussions for both countries. Experts predict that China will likely continue its aggressive stance towards the U.S., potentially impacting global trade relations significantly.