Just hours after report that US and China are seeking to re-engage in trade negotiations, there were reports that Trump is planning to slap 25% tariffs on USD 200B in Chinese imports, instead of 10%. The product list could include food, chemicals, steel and aluminum, consumer goods etc. The announcement could be made as soon as on Wednesday, that is today.

Trump defended his try policies in a rally speech in Tampa. And he put the blame on other countries again and said “China and others have targeted our farmers. Not good. Not nice. And you know what our farmers are saying? ‘It’s OK. We can take it.” He also tried to equate the support to his policy to patriotism, in typical authoritarian government way, by hailing the farmers as “true patriots”.

Market reactions to the news were relatively muted though. USD/CNH (offshore Yuan) dipped to as low as 6.770 on news of possible restart in trade talks. But that it’s back above 6.8 on the news of the possible 25% tariffs. It’s clear what is driving the Yuan exchange rate.

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