China's Yuan Faces Pressure Amid Export Boost Limitations

The ongoing fluctuations of the yuan currency against the dollar could lead to only a slight increase in China's export economy, as authorities are likely to intervene to stabilize the currency's decline. Wang Tao, chief China economist at UBS Group AG, highlighted concerns over the yuan's downward pressure caused by rising U.S. tariffs and a strengthening dollar. She emphasized the potential domino effect on currencies of China's competitors if the yuan continues to weaken, offsetting export pricing benefits.

Chinese officials are intensifying measures to support the yuan's value following its recent dip, close to historical lows against the dollar in offshore trading, amid impending tariff hikes from the U.S. New measures aim to balance capital outflow control, financial stability, and export competitiveness amidst tariff threats. President Trump's proposed trade tariffs with China, potentially reaching 60%, could significantly impact trade dynamics, affecting a quarter of China's GDP driven by exports last year.

Goldman Sachs' chief economist, Jan Hatzius, anticipates China employing monetary and fiscal strategies to mitigate the tariffs' adverse effects, projecting a slowdown in the second-largest economy's growth. Hatzius suggested that policy measures could alleviate much of the tariffs' impact on trade dynamics. China's trade surplus, reaching record highs, reflects businesses accelerating shipments to evade potential tariff increases. The strategy has also boosted exports to Southeast Asia, reflecting adjustments in global supply chains amid geopolitical shifts.