Tough times are ahead for the Chinese currency! According to Bloomberg, citing well-informed economic sources, China may respond to the actions of US President-elect Donald Trump with monetary and fiscal policies or even a yuan devaluation.
Zhennan Li, an analyst with Banque Pictet & Cie SA in Hong Kong, predicts the offshore yuan could weaken to 7.5 against the dollar if the Trump administration puts 20% additional levies on all Chinese imports and as much as 7.7 if the tariffs come in at 60%.
Let us remind you that the Republican Party has previously threatened a 60% tariff on Chinese goods. Experts believe such a measure could disrupt the mutually beneficial trade relationship between Washington and Beijing. According to economists, China’s retaliation is likely to first target agricultural trade (soybeans, beef, and corn) and later move on to automobiles. Some specialists suggest Beijing might limit exports of rare earth metals and batteries for electric vehicles.
Economists predict that during Trump’s second term, China’s GDP growth will slow more than expected.
“China will grow more slowly because of the second Trump US administration, though such losses will be partially offset by budgetary and monetary stimulus,” Dennis Shen, primary China economist at Scope Ratings, said.
Currently, China imports soybeans, cotton, corn, microchips, SUVs, liquefied natural gas, oil, coking coal, copper, and copper ore from the United States. Meanwhile, the US buys smartphones, computers, lithium-ion batteries, plastic products, surveillance cameras, household appliances, footwear, toys, and more from China.
