Trump Threatens to Increase Tariffs on China, USDCNH Surges

On April 7, the trade tension between the US and China further escalating marked by the recent tariff hike and retaliatory measure.

US-China Trade War Escalated

On April 2, 2025, President Donald Trump declared “Liberation Day,” imposing a universal 10% tariff on imports from most countries, with additional tariffs targeting specific nations, including a 34% tariff on Chinese goods, effective April 9.

China retaliated by China announced a 34% tariff on all U.S. imports, set to take effect on April 10, in retaliation to U.S. tariff measures. The Chinese Commerce Ministry has vowed to “fight to the end” and implement further retaliatory measures to safeguard its economic interests.

However, this further escalated as Trump has threated an additional 50% tariff on Chinese imports if China does not withdraw its retaliatory 34% tariff by April, potentially raising total tariffs on Chinese goods to 104%.

Market on Edge with Underlying Concerns

Global markets have experienced significant volatility due to escalating trade tensions. However, on Monday, global stock markets remained relatively calm, with major indices showing some rebound amid mixed sentiment.

Despite this rebound, underlying concerns about escalating trade tensions—particularly between the U.S. and China—continue to pose risks to market stability.

USDCNH Surges with Weaker Yuan

USDCNH has surged further following President Trump’s threat and China’s subsequent implementation of export controls on critical supplies to the U.S., such as rare-earth minerals and technologies.

Additionally, the People’s Bank of China (PBOC) is considering reducing interest rates to lower borrowing costs and stimulate domestic demand, contributing to the yuan’s recent weakness against the U.S. dollar.

(USDCNH, Day Chart; Source: Ultima Market MT5)

The U.S. Dollar has been trading at multi-month highs against the weakening Offshore Chinese Yuan.

Despite expectations of a significant yuan depreciation, the People’s Bank of China (PBOC) has set the yuan’s midpoint trading rate just 0.1% weaker at 7.198 against the U.S. dollar. This cautious approach is designed to balance export competitiveness with financial stability. As a result, the Offshore Chinese Yuan is likely to remain within its current range for the time being.

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