China Prepares for Potential Trump Tariffs with Yuan Strategy

China is reportedly considering allowing the yuan to weaken in 2025 in anticipation of potential higher trade tariffs during a second Donald Trump presidency. Analysts suggest that this strategy could impact regional currencies and have broader trade implications.

China is reportedly planning to weaken its currency, the yuan, in 2025 in anticipation of possible higher trade tariffs if Donald Trump secures a second presidential term, according to insiders. The move could significantly affect regional currencies and trade dynamics.

Following the news, the yuan dropped about 0.3% to 7.2803 per dollar, influencing other China-sensitive currencies like the South Korean won and the New Zealand dollar. The Australian dollar also fell to a one-year low, reflecting market reactions to the potential strategic shift in China's currency policy.

Market analysts argue that China aims to establish a strong negotiating position by taking early action on the yuan. However, they warn of potential backlash from other trading partners if the currency's depreciation becomes too aggressive. Chinese leadership is also concerned about maintaining currency stability to avoid jeopardizing economic achievements.

(With inputs from agencies.)