President Donald Trump asserted on Tuesday that China is engaging in currency manipulation of the Yuan to mitigate the impact of U.S. tariffs. He stated intentions to impose tariffs on pharmaceuticals, noting China’s existing 104% tariff rate. Trump expressed optimism for an eventual agreement with China, despite anticipating further tariff implementations.
Market reaction saw the AUD/USD pair trading marginally higher at 0.5960, up 0.04% on the day.
The U.S.-China trade war, initiated in 2018, involves the imposition of trade barriers, primarily tariffs, leading to retaliatory measures and increased import costs. Trump’s initial tariffs on China were based on allegations of unfair trade practices and intellectual property theft. China responded with tariffs on U.S. goods. A Phase One trade deal in January 2020 aimed to address these issues, but the COVID-19 pandemic shifted focus. President Biden maintained existing tariffs and added new levies.
With Trump’s return to office, trade tensions have resurfaced. His campaign pledge to impose 60% tariffs on China signals a potential resumption of the trade war, potentially disrupting global supply chains, reducing investment, and contributing to inflationary pressures.
