Yuan Hits 17-Year Low as U.S.-China Trade Tensions Escalate Amid New Tariff Salvo

The Chinese Yuan plunged to its weakest level since 2007 on Thursday, as the intensifying trade standoff between Washington and Beijing rattled global currency markets. The slide follows U.S. President Donald Trump’s latest move to hike tariffs on Chinese goods to an eye-watering 125%, escalating a battle that has already disrupted global supply chains.

The new duties, which officially took effect at 12:01 a.m. EDT Thursday, prompted immediate retaliation from Beijing, which raised tariffs on U.S. imports to 84%, up from 34% previously. The sharp currency depreciation reflects mounting uncertainty as businesses brace for prolonged disruption.

China’s Strategic Shift Amid 90-Day Tariff Loophole

While President Trump offered a 90-day tariff pause for countries that have not retaliated against the U.S., China was excluded from this leniency. Analysts say Beijing may exploit the gap by rerouting exports through third-party countries to avoid the steep U.S. import taxes. Such backdoor strategies could undercut the impact of the punitive levies while prolonging trade tensions.

White House officials said over 75 countries have initiated discussions with U.S. trade representatives in recent days. “We are open to negotiation,” said Treasury Secretary Scott Bessent, adding that Vietnam, India, Japan, and South Korea have already reached out for talks.

Yuan’s Fall Deepens Economic Worries

The offshore Yuan traded above 7.37 per U.S. dollar, while the onshore rate weakened to 7.3518—its lowest since December 2007. Currency analysts suggest the depreciation could help Chinese exporters remain competitive under the new tariff regime but also risk triggering capital outflows and inflationary pressures at home.

“China is playing a long game,” said one economist. “They’ve used this playbook before—allow the Yuan to weaken to absorb external shocks while leveraging state-backed stimulus.”

Mixed Market Reactions as Stocks Surge

Despite the tariff tit-for-tat, equity markets posted surprising gains. The Nasdaq surged over 12% on Wednesday—its strongest daily performance since 2001—while the S&P 500 and Dow added 9.5% and 8% respectively. In Asia, Japan’s Nikkei climbed 8.4% and Hong Kong’s Hang Seng rose 3.7%.

Some experts, however, urged caution. “These are classic bear market bounces,” warned Stansberry Research analyst Brian Tycangco. “The underlying risks from prolonged trade fragmentation and high tariffs remain unresolved.”

What Lies Ahead

As trade negotiations unfold, investor sentiment is expected to remain fragile. Beijing’s next move will be closely watched, especially if it pushes forward with additional fiscal or monetary support. Meanwhile, the direction of the Yuan and the potential for further retaliatory tariffs will likely shape the next chapter of this high-stakes global economic clash.

Stay tuned for real-time analysis as this developing story continues to impact markets worldwide.

Stay Updated with Daily Forex Pakistan.