The yuan is more vulnerable than it was during the last trade war. Chinese government bond yields are well below those in the US. Foreign companies are pulling back investments. Economic growth is patchy, and the spectre of deflation may drag interest rates even lower.
China’s President Xi Jinping wants a “powerful currency” that is stable enough to play a rising role in global trade. Donald Trump’s return looks set to challenge that ambition.
The yuan risks years of downward pressure during the second Trump presidency, and the threat of another trade war is already fuelling bets against the currency. Analysts expect the yuan to break a 17-year low against the US dollar in 2025, with the most bearish observers predicting a decline of around 10%.
