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The renminbi weakened and Chinese stocks fell after U.S. President Donald Trump said he could impose 10% tariffs on China starting next month.
The CSI 300 index of companies listed in Shanghai and Shenzhen was down 1 percent on Wednesday afternoon. Hong Kong’s Hang Seng index fell 1.8 percent, dragged down by mainland Chinese companies listed in the territory.
The offshore renminbi, which trades outside limits imposed by Chinese financial authorities, weakened 0.3 percent on Wednesday to 7.29 per dollar.
The dollar appreciated 0.15 percent against a basket of currencies including the pound sterling and the yen. Gold prices also hit an 11-week high of $2,758.
China had largely avoided direct attention from Trump during his whirlwind first day in office, during which he suggested imposing 25 percent tariffs on the United States’ largest trading partners, the Canada and Mexico, leading traders to reduce their bets on a resumption of the trade war started under his mandate. first term.
Trump said the 10% tariffs were being considered to punish China for the flow of fentanyl opioids to Mexico and Canada. The United States has accused China of sending chemicals used to make fentanyl to Mexico, where cartels use them to make the drug.
It was a repeat of a threat the new president had made during his campaign.
Traders widely expect the U.S. dollar to continue to strengthen against the currencies of major trading partners, including China, as rising tariffs and falling interest rates in China weigh on the renminbi.
Some 27 percent of fund managers surveyed in a Bank of America survey said long U.S. dollar positions were the busiest trade in January.
Stocks in the rest of Asia were broadly higher on Wednesday. Korea’s Kospi index rose 1.3 percent and Japan’s broad Topix index rose 0.9 percent. Taiwan’s benchmark index rose 1 percent while India’s Sensex rose 0.2 percent.
During the presidential campaign, Trump also threatened to impose a separate 60% levy on Chinese imports.
