The offshore yuan edged lower to around 7.31 per dollar on Tuesday, pressured by a stronger US dollar as President Trump signed an executive order imposing 25% tariffs on all steel and aluminum imports.
Yuan decreases as trade war continues
The move, which also extends to finished metal products, is part of the administration’s broader efforts to counter what it describes as unfair trade practices by countries like China and Russia, who are accused of circumventing existing duties through third-party markets.
The decision escalates already fraught trade tensions between the world’s two largest economies. The Trump administration has also implemented a 10% tariff on Chinese goods, while 25% levies on imports from Canada and Mexico remain temporarily on hold. Additionally, the US is preparing to introduce reciprocal tariffs on a wider range of trading partners, raising concerns about a full-fledged global trade war.
China counters US tariffs
In response, China announced new retaliatory tariffs on US imports, set to take effect on February 10, 2025. These include a 15% levy on coal and liquefied natural gas (LNG), as well as 10% duties on crude oil, agricultural equipment, and vehicles. These measures are expected to impact US energy and manufacturing sectors, further straining economic relations between the two nations.
China has taken additional steps to counter US trade pressure
Beyond tariffs, China has taken additional steps to counter US trade pressure. Authorities launched an anti-monopoly investigation into Google, signaling increased scrutiny of major American tech firms operating in the Chinese market. Furthermore, Beijing added PVH Corp.—the parent company of fashion brands Calvin Klein and Tommy Hilfiger—to its "unreliable entity" list, a move that could lead to tighter restrictions on the company’s operations in China.
With trade tensions escalating, market participants are closely monitoring potential currency interventions by the People’s Bank of China (PBOC) to stabilize the yuan and prevent excessive depreciation. Additionally, investors are awaiting further policy responses from both the US and Chinese governments as the economic fallout from these escalating trade measures continues to unfold.
