Chinese Yuan Weakens on Latest US Tariffs, Markets Unfazed

The Chinese yuan weakened on Tuesday after the US government announced new tariffs on tens of billions of dollars worth of Chinese goods. As expected, Beijing retaliated a day later, confirming its own import levies on American products. This is the latest development in the intensifying US-China trade war, causing mixed results: analysts are worried but markets have yet to be rattled.

The White House confirmed on Monday that the US government is implementing a 10% tax on $200 billion worth of Chinese products. The first round of tariffs will be instituted on Monday, and the second series of levies, which will rise to 25%, will begin on January 1.
President Donald Trump said in a statement:

For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies.  We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.  But, so far, China has been unwilling to change its practices.

The Chinese government soon announced its own retaliatory tariffs on $60 billion of US goods. The Finance Ministry said that it will give the go ahead to 5% and 10% tariffs on 5,200 American goods, ranging from coffee to honey to industrial chemicals. These latest taxes will go into effect on September 24.
The world’s two largest economies have already applied tariffs to $50 billion of their goods.
Global stocks have been largely unaffected by the new tariffs. Leading US stock indexes are rallying, while most Asian markets are surging. Chinese government officials say that they can weather the tariff strife.
Liu Shijin, a Chinese government adviser and member of the monetary policy committee at the People’s Bank of China (PBOC), said at an event in Tianjin:

The trade frictions don’t have a huge direct impact on China’s economy, but they may impact people’s expectations. This is a test for us and we should stick to our direction and never stop.

Amid declines in domestic stocks and the yuan, Liu added that investors had “overreacted” to trade fears.
The USD/CNY currency pair rose 0.11% to 6.8649, from an opening of 6.8571, at 16:23 GMT on Tuesday. The EUR/CNY climbed 0.14% to 8.0219, from an opening of 8.0137.

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