China’s 84% tariffs on US imports go into effect, Yuan drops to an 18-year low

The friction between the world’s two largest economies heightened after both China and the US imposed retaliatory tariffs on all imports. US President Donald Trump raised tariffs on Chinese goods to 125% Wednesday after Beijing announced a 50% duty increase on US goods, causing the onshore yuan to tumble to lows seen last in 2007. 

Beijing’s countermeasure, an 84% blanket tariff on US goods, took effect on Thursday and immediately shook currency markets. The Chinese yuan fell to its weakest level in more than 18 years.

BREAKING: China's retaliatory 84% tariffs on US imports have gone into effect

— The Spectator Index (@spectatorindex) April 10, 2025

The onshore yuan closed domestic trading at 7.3498 per USD, the lowest since December 2007, while the offshore yuan hovered around 7.36.

The rapid depreciation followed two consecutive months of deflation in China, with March consumer prices dropping 0.1% year-on-year. February had seen a steeper 0.7% fall, adding to the government’s list of problems that include weakening domestic demand in the face of trade headwinds.

Capital market jitters prompt emergency measures

According to sources familiar with the matter, cited by Cryptopolitan, top Chinese officials convened an emergency meeting on Wednesday to discuss policy changes to prop up the economy. Beijing is expected to roll out additional fiscal support to counteract the damage caused by reduced trade volumes.

In tandem, the People’s Bank of China set the midpoint rate, the benchmark from which the onshore yuan can trade within a 2% band, at 7.2066 per dollar, the lowest since September 2023. That allowed for a lower floor of 7.3507, just above the previous low seen last year.

Still, both onshore and offshore yuan values have fallen more than 1% in April.

Market observers saw the central bank’s stronger-than-expected midpoint fixing as a sign that authorities do not want a sharp yuan depreciation, even in a trade standoff with the US.

On other currencies, the US dollar dropped 0.7% to 146.68 yen and lost 0.62% against the Swiss franc, trading at 0.8522. The euro rose 0.32% to $1.0985.

The Australian dollar, often seen as a proxy for Chinese economic health, saw sharp swings. It initially slipped 0.33% to $0.6132 and had fallen as much as 0.5% earlier in the day. However, by Thursday morning, the Aussie rebounded by 3.3% after briefly touching a five-year low at $0.5910.

Breaking a multi-billion trade deficit

In 2024, the total value of goods traded between the two countries reached $688.28 billion, according to United Nations data. This figure is 275 times higher than the level in 1979, when diplomatic ties were first established, and over eight times larger than in 2001, when China joined the World Trade Organization.

China is still the United States’ second-largest source of imports and third-largest export destination. US goods exports to China accounted for 7% of total US exports in 2024, while imports from China made up 13.8% of total imports. On the flip side, China sent 14.7% of its total exports to the US and sourced 6.3% of its imports from it.

Analysts say the practical effect of tariffs may be limited because China imports approximately $160 billion worth of goods from the US annually and exports over $400 billion. 

“I don’t think they can match economically,” said Rick Waters, director of the Carnegie China think tank in Singapore. “So what they tend to do is move into adjacent realms to exact a price.”

China could also direct its anger to America’s services sector, where the North holds a relative advantage. Washington consistently records a surplus of services with China in finance, law, and consulting. A report by China’s State Council released Wednesday identified China as the US’s fifth-largest service export market.

Beijing could respond by restricting US companies from participating in government procurement or limiting their cooperation with Chinese firms to tighten the screws on American service providers operating in China.

China commission to sue the US

China’s Customs Tariff Commission believes Trump is making a “mistake upon another mistake” by adding a 125% levy on the Asian country and pausing duties on other jurisdictions. In a statement released Wednesday, the Commission urged America to resolve disputes through “equal dialogue based on mutual respect.”

Beijing also filed a new complaint with the World Trade Organization, accusing the United States of “bullying China.”

“We believe Beijing views these US trade actions as nothing short of a declaration of economic war,” Analysts from BCA Research said in a note to clients. “Chinese authorities will allow the yuan to depreciate materially. The US-China confrontation is set to escalate from here.”

“It seems likely that the US President blinked when confronted with a potential recession, a political backlash, a near equity bear market, and the early warning signs of a financial crisis,” said Kyle Rodda, an analyst at Capital.com.

“Even if President Trump does cut deals with trading partners,” Rodda added, “there’s harm that’s been done to the markets and the US economy that will take time to heal from.”

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