Reports indicate that a 34% tariff increase on a wide range of Chinese products was recently announced. Economists have stated that these new tariffs, combined with existing ones from a previous administration that was continued under the current one, have raised the average US tariff on Chinese goods to approximately 65%. These new tariffs are set to take effect on April 9th. This action is reportedly part of a larger plan to implement tariffs on various global trade partners, according to Financial Express.
Impact On Currency
The announcement of new US tariffs by Donald Trump has had a notable impact on the Chinese yuan:
- Yuan Weakening:
- The Chinese yuan experienced a significant weakening in both onshore and offshore markets.
- It fell by as much as 0.7%, representing the largest drop since December.
- Stabilization Efforts:
- Despite attempts by China’s central bank and major lenders to stabilize the currency, the tariffs have exerted further downward pressure.
- Financial Pressure:
- The tariffs have increased financial pressure on the Chinese currency.
China’s Retaliation
The announcement of new US tariffs has triggered strong reactions and potential retaliatory measures from China:
- Chinese Criticism:
- China’s state-run Xinhua News Agency has condemned the tariffs as “self-defeating bullying.”
- They argue that the US is damaging the global trade system, which benefits both nations and harms the broader global economy.
- Chinese Investment Restrictions:
- China has reportedly taken steps to limit its companies’ investments in the United States.
- This move is seen as an attempt to gain leverage in potential trade negotiations with the US administration.
- Potential Retaliatory Actions:
- China could respond by increasing tariffs on US goods.
- They may also restrict exports of key minerals.
- China has a history of retaliating against previous US tariffs.
- Experts warn that this latest move could escalate tensions, potentially leading to further economic damage.
Trade War To Escalate?
The relationship between the US and China has deteriorated since Donald Trump’s return to office. Key points of tension include:
- Lack of Communication:
- There has been a prolonged period of over two months without direct communication between President Trump and Chinese President Xi Jinping.
- Fentanyl Trafficking Dispute:
- A significant point of contention is the issue of fentanyl trafficking.
- Trump accuses China of not doing enough to prevent the flow of fentanyl precursors into the US.
- Tariffs and Trade:
- The issue of fentanyl trafficking is cited by Trump as a factor contributing to the imposition of 20% tariffs on Chinese goods earlier in the year.
- This contributes to, and is a part of, the increasing trade tensions between the two nations.
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Source: Financial Express
