USD/CNH holds steady around 7.1800 as US-China negotiations enter second day
- USD/CNH moves little ahead of the US-China trade talks entering the second day.
- US-China discussions are scheduled to resume on Tuesday, after five hours of negotiations were held in Stockholm on Monday.
- Traders expect the Fed to keep the benchmark interest rate unchanged in July.
USD/CNH inches lower after registering gains in the previous three sessions, trading around 7.1790 during the Asian hours on Tuesday. The offshore Chinese Yuan (CNH) holds ground against the US Dollar (USD) ahead of the United States (US)-China negotiations entering the second day.
On Monday, US Treasury Chief Scott Bessent met with China’s Vice Premier He Lifeng at Sweden’s Rosenbad government offices. The meeting aims to extend a fragile trade truce by three months ahead of an August 12 deadline.
China’s 10-year government bond yield declines slightly to near 1.73% on Tuesday as traders cautiously monitor ongoing US-China trade talks. A positive outcome could pave the way for a meeting between US President Donald Trump and Chinese President Xi Jinping later this year, potentially easing tensions in critical sectors like semiconductors and rare earths.
The USD/CNH pair gains ground as the US Dollar (USD) receives support from trade optimism, driven by the United States (US)-European Union (EU) trade agreement finalized on Sunday, setting 15% tariffs on most European goods, taking effect on August 1.
Traders keep their eyes on the US Federal Reserve’s (Fed) interest rate decision due on Wednesday. The US central bank is widely expected to keep the benchmark interest rate steady between 4.25% and 4.50% on Wednesday. The FOMC press conference will be observed for any signs that rate cuts may start in September.
Market participants are also awaiting key economic data this week, including the Q2 Personal Consumption Expenditures (PCE) inflation report and July’s Nonfarm Payrolls, for further insight into the health of the US economy.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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