JP Morgan claims China possibly to devalue yuan to offend Trump

12/19/2024 6:41:26 AM

(MENAFN) JP Morgan Chase has projected that the yuan could depreciate by up to 15% if Donald trump enacts a significant increase in tariffs on Chinese imports during his second term. In a report titled “Bracing for a storm,” analysts speculated that US tariffs on Chinese goods could rise from 20% to 60%, with similar levies also targeting imports from Malaysia and Vietnam. In retaliation, China may devalue its currency and impose additional tariffs to mitigate the economic impact, though this might not prevent GDP growth from slipping to 3.9% in the coming year.

JP Morgan noted that a yuan depreciation of 10-15% would be far smaller than the 28-30% drop seen in 2018-19 when China allowed currency depreciation to offset US tariff hikes. The yuan has already weakened to its lowest point against the dollar since late 2023. Trump, who takes office on January 20, has also promised to raise tariffs on Canadian and Mexican goods. The analysts warned that emerging economies like Malaysia, Vietnam, and Mexico could face the brunt of the trade war’s effects, with China redirecting its exports to other markets, while India would be less impacted.

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