Xu Xiaoqing: Where Will Tariffs Take the Yuan? (AI Translation)

【周刊提前读】徐小庆专栏：关税冲击下人民币何去何从？

Since April 2, 2025, when former President Donald Trump launched a global tariff war, the U.S. Dollar Index has at times dipped below the 100 mark. Despite the sharp decline in the dollar, the renminbi did not appreciate passively against the greenback to the same extent as other major currencies, instead remaining steady in the vicinity of 7.3 per dollar. The renminbi’s performance lagged behind most major currencies, causing the renminbi’s exchange rate index against a basket of currencies to slide alongside the dollar, reaching the lower limit of its post-pandemic trading range. After the joint statement from the U.S.-China Economic and Trade Talks in Geneva was released on May 12, the renminbi briefly broke through the 7.2 mark, moving in tandem with the dollar in both directions.

The recent fluctuations in the renminbi differ from previous patterns, reflecting market concerns that, amid the threat of a tariff war, the exchange rate could become a key tool to counteract a decline in China’s exports—that is, the higher the tariffs, the more the renminbi would depreciate. But does the export sector truly have a significant impact on the renminbi?

In the past, the renminbi’s exchange rate and exports demonstrated a solid historical correlation. However, since the second half of 2023, the two have shown signs of “decoupling”: while export growth has continued to rebound, the renminbi’s exchange rate has lingered in the 7.0–7.3 range against the U.S. dollar, with no clear trend of appreciation. Since the United States began imposing additional tariffs on Chinese goods in 2018, China’s exports have remained notably resilient, yet over the past seven years, the renminbi has depreciated from 6.3 to 7.3 per dollar. Clearly, exports have not been the key factor behind the renminbi’s persistent depreciation in recent years.