China mulls yuan depreciation in face of potential US tariffs

On Wednesday, Reuters reported that China's leadership is contemplating a strategy to allow the yuan to weaken in the year 2025. This consideration is a response to the anticipated increase in U.S. trade tariffs as Donald Trump is poised to re-enter the White House. The discussions suggest that China is preparing for a significant economic stimulus to mitigate the effects of Trump's proposed trade policies.

According to sources familiar with the situation, Trump has announced his intention to implement a 10% universal import tariff along with a 60% tariff on goods imported from China to the United States. These trade barriers could significantly affect China's export-driven economy.

In anticipation of these measures, Chinese officials are debating whether to permit the depreciation of the yuan. A weaker yuan could potentially reduce the cost of Chinese exports, making them more competitive internationally despite the imposition of higher tariffs. This would also result in more relaxed monetary conditions within mainland China.

The information regarding these internal discussions came from three individuals who have knowledge of the matter but have chosen to remain anonymous due to the sensitivity of the issue and because they are not authorized to disclose such plans publicly.

As of now, the People's Bank of China (PBOC), which is the central bank of the country, has not provided any comments when approached by media outlets. Similarly, the State Council Information Office, responsible for government media relations, has not offered any immediate response to inquiries about this potential policy shift.

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Source: Investing.com