The offshore yuan fell to around 7.30 per dollar on Thursday, reversing gains from the previous session as investor caution resurfaced amid renewed concerns over US-China trade relations.
Offshore yuan falls on tariff uncertainty
The retreat in the yuan reflected broader risk aversion in financial markets, with sentiment turning fragile following fresh signals of escalating tensions between the world’s two largest economies. The White House released a fact sheet emphasizing that some Chinese goods could face a combined tariff rate of up to 245%, largely in response to Beijing’s own decision to raise tariffs on US imports to as high as 125% as part of its latest round of retaliatory measures.
In response, China’s Foreign Ministry swiftly dismissed Washington’s move, accusing the US of playing a “numbers game” with tariffs and stating that Beijing “will pay no attention to the US tariff numbers game.” Chinese officials reiterated their position that tit-for-tat escalation would only harm global economic stability, while signaling that China would remain firm in defending its interests.
Despite the heightened rhetoric, there are still glimmers of hope for progress. Reports suggest that China remains conditionally open to renewed trade talks, provided that Washington softens its approach. Beijing has called on the US to abandon its strategy of “extreme pressure, threats, and blackmail,” and instead engage in dialogue based on principles of equality, mutual respect, and shared benefit. Chinese officials have emphasized that constructive engagement, rather than coercive tactics, is the only path forward toward a sustainable resolution.
Delicate balance between hope and fear
The market’s reaction underscores the delicate balance between hope and fear that continues to characterize the US-China relationship. While any signs of dialogue could stabilize the yuan and broader emerging market assets, uncertainty remains high, with traders wary of further retaliatory steps that could reignite financial market volatility. Moreover, analysts point out that a sustained weakening of the yuan could complicate China's domestic policy goals, particularly efforts to maintain financial stability and support consumer confidence. The People's Bank of China (PBoC) is expected to closely monitor currency movements, with speculation rising that authorities could step in with stronger verbal or actual interventions if depreciation pressures become disorderly.
In the near term, developments in trade negotiations and any shifts in tone from either side will likely drive sentiment around the yuan, with broader implications for global risk appetite and capital flows into emerging markets.
