SHANGHAI: The yuan eased on Thursday after China sought the World Trade Organization’s intervention to rule on new tariffs imposed by U.S. President Donald Trump, heightening market concerns of a potentially damaging trade war between the two economic giants.
China filed a World Trade Organization complaint on Wednesday against Trump’s fresh 10% tariffs on Chinese imports and his cancellation of a duty-free exemption for low-value packages, arguing the actions are “protectionist” and break WTO rules.
“Markets may have been reacting to China’s WTO trade dispute complaint against the latest U.S. tariffs,” Citi analysts said in a note.
“The key question is how, if at all, Trump will react. We continue to wait for the Trump-Xi talk.”
Trump said on Tuesday he was in no hurry to speak with Chinese President Xi Jinping as the tariff took effect just after midnight Eastern Time.
The spot yuan opened at 7.2700 per dollar and was last trading 51 pips lower than the previous late session close at 7.2771 as of 0221 GMT.
Yuan slumps on trade-war anxiety; yen jumps
Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1691 per dollar, its strongest since November 8, 2024, and 844 pips firmer than a Reuters’ estimate.
The dollar dropped overnight and hovered near 1-week low against its major peers.
“Assuming that the U.S. dollar pullback of late persists, then the USD/CNY cap at 7.20 is likely to hold until China’s ‘two sessions’ meetings in early March,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Parliamentarians and political advisers will gather in Beijing in March for two parallel sets of meetings called “Two Sessions”.
The dollar’s six-currency index was 0.028% lower at 107.62.
The offshore yuan traded at 7.279 yuan per dollar, up about 0.05% in Asian trade.
“Given prospects of U.S.-China negotiations, trade tensions could stay contained for now, with USD/CNH consolidating around 7.30,” said Chang Wei Liang, currency and credit strategist at DBS.
During Trump’s first term as president, the yuan weakened more than 12% against the dollar during a series of tit-for-tat U.S.-China tariffs between March 2018 and May 2020.
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