Hours before the latest U.S. retaliatory tariffs on China were set to take effect, President Donald Trump publicly accused Beijing of manipulating its currency to offset the impact of punitive tariffs, warning that the strategy could backfire on the oil-importing Asian nation.
Offshore Yuan Plunges to 17-Year Low
According to a Nikkei Asia report, the onshore yuan fell to 7.35 per dollar in morning trading on April 9, its lowest level in nearly 17 years. The freely traded offshore yuan dropped to a low of 7.42 a day earlier. While the People's Bank of China (PBOC) maintains that its reference rate reflects economic fundamentals, critics believe the central bank has set a weaker rate after Trump imposed a 34% reciprocal tariff on what he called 'Liberation Day.'
Tariff Escalation Reaches 104%
In response, China imposed its own 34% reciprocal tariff on U.S. goods, prompting Trump to add an additional 50%. The combined tariffs mean Chinese imports now face an effective rate of 104%, marking an unprecedented escalation in trade tensions. The move has fueled global uncertainty, with investors eyeing safe-haven assets such as gold and Bitcoin.
Trump Warns of Oil Import Vulnerability
Speaking at a National Republican Congressional Committee event on April 8, Trump criticized China's currency tactics, pointing out a strategic weakness: 'In the end, it's not good because they have to buy oil. We don't need oil and gas, we have more than any other country, but they have to buy it and that's where it hurts them.' A weaker yuan makes dollar-denominated oil imports more expensive, potentially squeezing China's economy despite export benefits.
Historical Precedent: Currency Manipulator Designation in 2019
The yuan manipulation allegations are not new. In 2019, the Trump administration officially labeled China a currency manipulator for the first time since 1994. The current crisis raises questions about whether the White House will take similar punitive measures. Meanwhile, the escalating trade war could boost demand for decentralized assets like cryptocurrencies as hedges against geopolitical risk, although short-term volatility remains high.