HONG KONG: China’s yuan dropped to its lowest level in seven weeks and stock markets slumped on Thursday after US President Donald Trump unveiled a sweeping set of reciprocal tariffs that were particularly heavy on China and its main trading partners.
While investors had been bracing for these tariffs over the past week, Washington’s latest punitive measures turned out to be more aggressive than expected.
Chinese imports will be hit with tariffs of 34%, on top of the 20% Trump previously imposed, bringing the total new levy to 54%. Countries in China’s supply chain were hardest hit, with Vietnam, Cambodia and Laos getting slapped with tariffs between 46% and 49% respectively.
China’s blue-chip CSI 300 Index fell 0.6% to a two-month low, while Hong Kong’s Hang Seng Index fell 1.5%.
“The tariff hike was larger than most market participants were expecting, so the initial market reaction is likely going to be a continuation of risk-off sentiment,” said Lynn Song, chief economist for Greater China at ING.
While immediate yuan depreciation pressure is likely, Song did not foresee an intentional devaluation as that would lead to more tariffs and undermine currency stability benefits.
Analysts said they are scrutinising China’s intent to defend the yuan, to indicate how keen it is to both contain contagion in emerging markets and negotiate with Trump.
China’s onshore yuan ended the domestic session at 7.3043 per dollar, the weakest close since February 12. The offshore yuan hit a fresh one-month low overnight.
