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Analysis: China's Yuan Depreciation Plans Spark Fears of Global FX Race to the Bottom


Photo by Reuters
Photo by Reuters

Summary


  • China is considering letting the yuan weaken in response to possible U.S. tariff hikes, raising concerns about a potential global FX race to the bottom.

  • A weaker yuan could help exporters but also risk triggering a cascade of tariff retaliation from other economies.

  • The Australian dollar hits a one-year low as the yuan depreciates, highlighting the broader impact of Chinese currency moves on global trade.


 

High-level discussions in China about allowing the yuan to weaken are sending ripples through global markets, raising concerns about the potential for a currency race to the bottom as tariffs and trade tensions escalate. As the U.S. administration under President Trump threatens to increase tariffs, China is considering using its currency as a tool to mitigate the impact of these trade barriers, creating potential shockwaves across the global economy.


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