China's Yuan Strategy Amidst Trump's Potential Tariffs

China may allow the yuan to weaken in 2025 in anticipation of potential tariffs under a second Trump presidency. This strategy aims to bolster Chinese exports and mitigate the impact of tariffs, though it may lead to complex negotiations and broader regional currency effects.

Reports suggest that China is considering letting the yuan weaken by 2025 in preparation for potential higher tariffs if Donald Trump secures a second term. This strategy, described as logical amidst a slowing economy, could bolster exports despite the political desire for a stronger renminbi.

Market reactions have been swift, with the yuan falling 0.3% and other region-sensitive currencies following suit. The strategy is not surprising to analysts, given the need for China to establish a strong negotiating position in trade talks.

However, experts warn that significant depreciation could have broader implications, affecting Asian currencies and raising potential backlash from trading partners. The discussions highlight China's precarious balance between economic strategy and maintaining international relations.

(With inputs from agencies.)