Trade tensions between the United States and China have flared anew in 2025 with a fresh wave of tariffs. In early April, Washington implemented sweeping “reciprocal tariffs” on Chinese goods, effectively raising total U.S. import duties on China to 145% (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). This escalation came in stages – an additional 34% tariff was announced on top of existing duties (China urges US to immediately lift tariffs, vows retaliation | Reuters), followed by subsequent hikes that brought the new levy to 125%, which, when added to prior tariffs (including a 20% tranche imposed earlier on Chinese goods linked to fentanyl chemicals), summed to a punitive 145% rate (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). President Trump justified these moves by declaring a national emergency over “a lack of reciprocity” in trade and arguing that persistent deficits and foreign trade practices undermine U.S. economic and national security (Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits – The White House) (Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits – The White House). As part of the crackdown, the White House also closed the “de minimis” loophole that had allowed duty-free entry of low-value parcels from China, meaning even small e-commerce shipments now face tariffs (China urges US to immediately lift tariffs, vows retaliation | Reuters).
Beijing has responded with retaliatory measures. Almost immediately, China’s Ministry of Commerce condemned the U.S. action as one-sided and urged Washington to “immediately cancel its latest tariffs,” vowing that China “will take countermeasures to safeguard its own rights and interests” (China urges US to immediately lift tariffs, vows retaliation | Reuters) (China urges US to immediately lift tariffs, vows retaliation | Reuters). China imposed its own additional tariffs on U.S. goods, reaching 84% in early April and later rising to 125% in response to the U.S. escalation (Trump's China Tariffs Raised to 145% - Overview and Trade Implications) (Trump's China Tariffs Raised to 145% - Overview and Trade Implications). By April 12, Beijing stated it would not further escalate beyond this point, effectively capping its tariff retaliation at 125%. Alongside tariffs, China targeted American interests through other means – including export restrictions on critical rare earth minerals (vital for high-tech and defense industries) and sanctions on dozens of U.S. companies (Trump's China Tariffs Raised to 145% - Overview and Trade Implications). These moves signal that China is leveraging its control of key materials in addition to conventional tariffs. Both governments have also carved out certain exceptions amid the tariff barrage. Washington’s reciprocal tariff order exempts categories like personal gifts, items already under U.S. metal tariffs, and some strategic goods (e.g. pharmaceuticals, semiconductors, critical minerals) from the extra duties (Trump's China Tariffs Raised to 145% - Overview and Trade Implications). Likewise, Beijing has likely shielded some essential imports (for instance, items it cannot easily source from elsewhere) even as it publicly emphasizes resolve against U.S. pressure. Overall, the tit-for-tat measures mark the most intense tariff crossfire since the trade war began, with officials on each side defending their actions as necessary – the U.S. framing them as long-overdue reciprocity to correct unfair trade practices, and China condemning them as protectionism that violates prior understandings.
The new tariffs cast a wide net over virtually all categories of trade between the world’s two largest economies. On the U.S. side, the import tariffs (now up to 145%) cover nearly the entire spectrum of Chinese exports, from consumer electronics and appliances to industrial components. American consumers and firms will feel the impact in sectors such as electronics (e.g. smartphones, computers), which are among the top U.S. imports from China, as well as machinery, household goods, textiles, and toys (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). For example, in 2024 the U.S. imported $54.5 billion in telecommunications equipment and $38 billion in computers from China, making these high-tech products some of the largest categories now facing steep tariffs. Other major imports like furniture, electrical machinery, toys and plastics are also in the crosshairs. Higher costs on these goods could ripple through U.S. supply chains and consumers, potentially raising inflation on everyday products. U.S. officials have argued that bolstering tariffs will incentivize companies to source from elsewhere or bring manufacturing back home in the long run, but in the short term many American businesses reliant on Chinese supply lines are bracing for increased costs. Notably, certain imports deemed strategic or hard to replace have been spared from the extra tariff layers – for instance, some medical supplies and critical minerals remain excluded from the 145% tariff policy (Trump's China Tariffs Raised to 145% - Overview and Trade Implications) – to avoid undue harm to U.S. interests.
China’s retaliatory tariffs similarly hit a broad range of U.S. exports to China, concentrating on sectors that can pressure American industries and political constituencies. Prominent U.S. goods now facing China’s 84%–125% tariffs include agricultural products like soybeans, corn, and meat, energy commodities, and manufactured items. China is one of the largest buyers of U.S. farm goods, so tariffs on soybeans (over $15 billion exported to China in 2024) and other crops directly hurt American farmers. Likewise, U.S.-made automobiles and auto parts, commercial aircraft, and integrated circuits (semiconductors) – all key U.S. exports – are targets for Beijing’s tariff counterstrike (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). In 2024, China imported about $7.5 billion in American passenger cars and $7 billion in integrated circuits, categories now facing hefty import duties. Energy trade is another affected area: China had ramped up purchases of U.S. crude oil and liquefied natural gas (LNG) in recent years (over $20 billion combined in 2024), but punitive tariffs make American energy less competitive in China, likely causing Chinese buyers to shift to alternative suppliers (such as Middle Eastern or Russian oil). In addition to tariffs, Beijing’s decision to restrict rare earth exports is aimed at U.S. high-tech manufacturers – a reminder of China’s dominant position in materials like neodymium and dysprosium used in electronics, electric vehicles, and defense systems (Trump's China Tariffs Raised to 145% - Overview and Trade Implications). By curbing these exports, China can indirectly squeeze industries in the U.S. (and globally) that depend on them.
Official rhetoric from both sides underscores their policy positions on these affected sectors. U.S. trade officials accuse China of unfair trade practices and intellectual property theft, asserting that tariffs on Chinese high-tech and industrial goods are leverage to address those issues (USTR extends some Chinese tariff exclusions, but many to fall away | Reuters). The Chinese government, for its part, denounces the U.S. tariffs as “discriminatory” and unwarranted, and frames its own tariff and non-tariff countermeasures as defensive moves to protect China’s interests (USTR extends some Chinese tariff exclusions, but many to fall away | Reuters). Beijing has also emphasized that it can weather the impact by pivoting to other markets or boosting domestic demand, and has criticized Washington for disrupting global supply chains (China urges US to immediately lift tariffs, vows retaliation | Reuters) (China urges US to immediately lift tariffs, vows retaliation | Reuters). In practice, the tariffs are prompting companies in both countries to adjust. American importers may accelerate the “China+1” strategy – diversifying sourcing to other countries – for products like electronics and apparel, although China’s well-established manufacturing ecosystem is not easily replaced overnight (China urges US to immediately lift tariffs, vows retaliation | Reuters) (China urges US to immediately lift tariffs, vows retaliation | Reuters). Chinese firms, meanwhile, are seeking to sell into Southeast Asia, Europe, and other regions to compensate for tougher access to the U.S. market (China urges US to immediately lift tariffs, vows retaliation | Reuters). Still, given that the U.S. is one of China’s largest customers (buying over $400 billion in goods annually in recent years), these tariffs pose a significant headwind for export-focused Chinese industries (China urges US to immediately lift tariffs, vows retaliation | Reuters). Certain sectors – such as Chinese electronics and American agriculture – are thus squarely in the firing line of the 2025 tariff exchange, reflecting how deeply intertwined the two economies have been and how disruptive a partial economic “decoupling” could be.
(Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English) Figure: U.S. trade in goods with China, 2000–2024 (in billions of USD). U.S. imports from China (red) greatly exceed U.S. exports to China (blue), resulting in a persistent trade deficit (grey shaded area) in China’s favor. The gap narrowed slightly during 2019–2020 amid the trade war and pandemic, but remains historically large. (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English) (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English)
Despite years of tariffs and negotiations, the U.S. trade deficit with China remains enormous. In 2024, the United States imported $438.9 billion in goods from China while exporting only $143.5 billion in return (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). This imbalance resulted in a recorded goods trade deficit of about $295.4 billion for 2024, an increase of nearly 6% from the previous year (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English) (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). The deficit had actually fallen in 2023 (to roughly $279 billion) amid global supply chain shifts and a post-pandemic pullback in trade, but rebounded in 2024 as U.S. imports from China ticked up again even as U.S. exports to China slightly declined (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). The latest data underscores how entrenched the imbalance is: American demand for Chinese-made products – from electronics to furniture – continues to vastly exceed China’s purchases of U.S. goods. By February 2025, the trend was still in force: year-to-date, the U.S. had recorded a $52.9 billion goods deficit with China in just the first two months of 2025 (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English).
This bilateral deficit has been a persistent feature of the global economy for decades. It ballooned through the 2000s as U.S. imports from China surged, reaching a historic high of $418 billion in 2018 (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). Ironically, that peak occurred during the Trump administration’s first term – the same period when initial tariffs on Chinese goods were imposed. Subsequent years saw some fluctuation: the trade war tariffs in 2018–2019 contributed to a decline in imports and exports on both sides, temporarily narrowing the deficit (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). In 2020, the deficit shrank further (to about $308 billion) as the Phase One trade deal and the COVID-19 pandemic altered purchasing patterns (China urges US to immediately lift tariffs, vows retaliation | Reuters) (PolitiFact | US trade deficit with China is less than $300 billion, not $1 trillion, as Donald Trump said). However, by 2021–2022 the gap widened again, approaching $353 billion in 2021 and $382 billion in 2022, as U.S. demand for consumer goods (many sourced from China) spiked during the pandemic recovery (International Trade) (International Trade). The data for 2023 and 2024 suggest some rebalancing – U.S. imports from China in 2024 were lower than in the late 2010s, and China’s share of total U.S. imports has declined somewhat – yet China still accounted for about 12% of all U.S. goods imports in early 2025 (second only to Mexico) (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). Meanwhile, China buys only around 7% of U.S. goods exports (despite being the U.S.’s third-largest export market), which explains the persistent deficit (PolitiFact | US trade deficit with China is less than $300 billion, not $1 trillion, as Donald Trump said).
Several factors have influenced these trade patterns. “Decoupling” efforts and tariffs have had an impact – U.S. companies have diversified supply chains to countries like Mexico, Vietnam, and India, which has moderated the growth of imports from China. In fact, Mexico has now overtaken China as the United States’ top trading partner in total volume, buoyed by nearshoring and the USMCA trade agreement (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). U.S. goods imports from Mexico have grown, and Mexico in 2024 accounted for about 13.8% of U.S. imports (slightly above China’s share) (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). This shift is visible in deficit numbers: for January–February 2025, the U.S. trade deficit with Mexico ($28.6 billion) was sizable but only about half of the China gap, and other countries like Vietnam, Ireland, and Switzerland now also contribute large U.S. deficits as some production and sourcing move away from China. Nonetheless, China remains the single largest source of America’s trade deficit in goods (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English). Even reduced from its peak, the bilateral deficit in 2024 was roughly twice as large as the next-biggest U.S. bilateral deficit (which was with Vietnam if excluding the unique case of Switzerland’s gold/pharma trade). This explains why U.S. policymakers continue to focus on China – it “consolidates Beijing as the primary contributor to the U.S. trade deficit” (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English).
From China’s perspective, the United States is a critical export market that it can ill afford to lose without economic pain. U.S. consumers buy hundreds of billions of dollars in Chinese-made goods each year, far more than any other country’s consumers do (China urges US to immediately lift tariffs, vows retaliation | Reuters). That is why Chinese officials have been keen to preserve trade flows even amid political frictions – for instance, China fell short of its purchase commitments under the 2020 Phase One deal, but it did increase imports of U.S. goods like farm products and energy by 2021–2022 (China urges US to immediately lift tariffs, vows retaliation | Reuters). In 2022, China imported $154 billion in U.S. goods (up from $106 billion in 2019) (International Trade) (USTR extends some Chinese tariff exclusions, but many to fall away | Reuters), partly reflecting those efforts. However, China’s imports from the U.S. slipped to $143.5 billion in 2024 (Five charts that explain the US-China trade relationship | Economy and Business | EL PAÍS English), showing that worsening relations and China’s economic slowdown have dampened its demand for American exports. U.S. exporters of industrial supplies, automotive goods, and agricultural commodities have felt the pinch as Chinese buyers turn elsewhere or as Chinese domestic production replaces some imports. Going forward, the trajectory of the trade deficit will depend on how companies adjust to tariffs and whether the two countries find any compromise. If the 2025 tariff hikes remain in place, we could see the bilateral trade volume decline and the deficit potentially shrink in absolute terms – but largely as a byproduct of depressed trade, not because of a reversal of competitive advantage. In the meantime, the U.S.–China imbalance remains a defining feature of the economic relationship, and it serves as a backdrop for the financial implications, including movements in currency exchange rates.
The renewed trade conflict and efforts at economic “decoupling” are reverberating in financial markets – notably in the exchange rate between the U.S. dollar and the Chinese yuan (USD/CNY). The Chinese yuan (also known as the renminbi) has faced downward pressure against the dollar, influenced by both the trade war and China’s domestic economic challenges. Over the past two years, China’s economy has contended with a slumping real estate market, weaker domestic demand, and very low inflation – conditions which prompted Beijing to ease monetary policy in contrast to the U.S. Federal Reserve’s tightening. This divergence in economic trajectory is reflected in interest rates: as of early 2025, U.S. interest rates are relatively high (after a series of Fed rate hikes in 2022–2023 to combat inflation), while Chinese rates have been trimmed to stimulate growth. The result is a record-wide yield gap favoring U.S. dollar assets, which has eroded the yuan’s appeal for investors (China steps up scrutiny of capital flows as yuan depreciates | Reuters). In fact, by January 2025 the interest rate differential between U.S. and Chinese government bonds was at its largest in decades, incentivizing capital outflows from China into higher-yielding dollar investments (China steps up scrutiny of capital flows as yuan depreciates | Reuters). This has contributed to the yuan’s depreciation. The Chinese currency lost about 2.2% of its value against the dollar in the months following the 2024 U.S. election (which brought a more hardline trade stance) (China steps up scrutiny of capital flows as yuan depreciates | Reuters), and overall in 2023 the yuan weakened roughly 2.6% against the dollar (Dollar Yuan Exchange Rate - 35 Year Historical Chart | MacroTrends). By early 2024, the yuan/dollar rate was fluctuating in the low-7s, compared to levels around ¥6.36 per $1 in early 2022 (Dollar Yuan Exchange Rate - 35 Year Historical Chart | MacroTrends).
(image) Figure: USD/CNY exchange rate in recent years (monthly averages for 2023–2025). A higher rate indicates a weaker Chinese yuan versus the U.S. dollar. The yuan depreciated in 2022 amid global market turmoil, regained some ground in early 2023, but slid again through late 2023 and 2024, reflecting China’s economic strains and widening US–China interest rate gap.
China’s struggling property sector and related debt concerns have also played a role in softening the yuan. The real estate downturn (exemplified by major developers in distress and sluggish home sales) has dampened China’s growth and confidence, leading investors to seek safety. Capital flows tell the story: Chinese banks and households have shown rising demand for foreign currency, and authorities reported significant net capital outflows in late 2024 and early 2025 (China steps up scrutiny of capital flows as yuan depreciates | Reuters). In response, Beijing has tightened scrutiny of capital movement – for instance, restricting how companies move funds overseas – to stem any large-scale flight that would further weaken the currency (China steps up scrutiny of capital flows as yuan depreciates | Reuters) (China steps up scrutiny of capital flows as yuan depreciates | Reuters). But even with capital controls, market forces have pushed the yuan lower. The exchange rate moved above 7 CNY per USD in mid-2022 and has at times approached 7.3–7.4 CNY per USD at its weakest points (the yuan’s lowest value in over 15 years) (US Dollar to Chinese Yuan Renminbi Exchange Rate Chart - XE.com) (China's Offshore Yuan Hits Record Low After PBOC Eases Grip). Such depreciation makes Chinese exports cheaper in dollar terms, partially offsetting the impact of U.S. tariffs (China's yuan hits post financial crisis low as trade war ramps up). Indeed, during past episodes of U.S.-China trade friction, the yuan’s slide has helped Chinese manufacturers stay competitive (a dynamic sometimes referred to as China using the yuan as a cushion or “weapon” in the trade war). However, Chinese policymakers have to balance that against the risk of triggering capital flight or domestic financial instability from a sharply weaker currency. Thus, the People’s Bank of China (PBOC) has intervened at times to slow the yuan’s decline – for example, by setting a stronger-than-expected daily reference rate (the yuan trading band midpoint) and by having state-owned banks sell dollars in the open market to prop up the yuan (China steps up scrutiny of capital flows as yuan depreciates | Reuters) (China steps up scrutiny of capital flows as yuan depreciates | Reuters). These actions have provided some stability and signaled that Beijing will not allow a disorderly devaluation. As a result, the yuan’s depreciation, while notable, has been gradual. In 2024 the yuan traded mostly in the range of 7.0 to 7.3 per dollar, and as of April 2025 it hovers around the mid-7s – a far cry from the days of ~6.5 per dollar in 2020, but also not a free-fall.
On the U.S. side of the equation, the strong U.S. dollar in recent years has been underpinned by the Fed’s rate hikes and the relative outperformance of the U.S. economy. Elevated U.S. interest rates have attracted funds from around the world, including from China, into dollar-denominated assets, which in turn supports the dollar’s exchange rate. Additionally, bouts of global uncertainty (to which U.S.-China tensions contribute) often lead investors to buy U.S. dollars as a safe-haven currency. This dynamic means that escalating trade tensions can ironically strengthen the dollar even as they pose risks to global growth. However, there is a flip side: if tariffs drive up U.S. import costs, they could add to inflationary pressure in America. The Fed might respond to any persistent inflation by keeping monetary policy tighter for longer, which would further bolster the dollar – but if higher prices start hurting U.S. consumer spending or corporate profits, sentiment toward the dollar could eventually be affected negatively. At the moment, though, the predominant effect has been a firmer dollar and a weaker yuan. Top Chinese officials have downplayed the yuan’s slide, with some suggesting that market-driven depreciation is “under control” and reflecting fundamentals. They point out that China still runs an overall trade surplus and has significant foreign exchange reserves to buffer the currency. Indeed, China’s global trade surplus (not just with the U.S.) provides a steady inflow of dollars. But weak domestic demand and low yields in China are major headwinds for the yuan’s value (China steps up scrutiny of capital flows as yuan depreciates | Reuters). Unless China’s economic outlook improves or the U.S. interest rate cycle turns, these pressures on the yuan are likely to persist.
In summary, the USD/CNY exchange rate has been trending upward (yuan weakness) amid the trade conflict and China’s economic slowdown. The 2025 tariff escalation feeds into this trend by heightening uncertainty and reducing China’s export earnings in U.S. dollars. If the trade war drags on, China may allow the yuan to gradually depreciate further to help exporters, while carefully managing the pace to avoid financial turbulence. For its part, the U.S. would see a stronger dollar make Chinese imports relatively cheaper (mitigating some tariff effects) but also make U.S. exports less competitive in other markets. Currency movements thus become an implicit part of the standoff. Both countries’ central banks will be crucial in the coming months – the PBOC in maintaining confidence in the yuan, and the Fed in navigating between controlling inflation and responding to any economic slowdown from trade developments. The dollar–yuan relationship will be a barometer of how these economic forces play out. Already, Chinese regulators have tightened capital controls and used currency reserves to stabilize the yuan (China steps up scrutiny of capital flows as yuan depreciates | Reuters), while U.S. policymakers are watching to ensure China doesn’t “weaponize” its currency by letting it drop too fast. The interaction of trade policy and exchange rates adds another layer of complexity to the U.S.-China economic rivalry.
The escalation of tariffs in 2025 marks a significant step toward economic decoupling between the U.S. and China. Both nations are asserting their interests – the U.S. aiming to pressure Beijing into structural changes (or to divert trade elsewhere), and China aiming to show it won’t be bullied, even as it seeks to minimize damage to its growth. The trade deficit remains a point of contention, and recent data show it is not disappearing anytime soon (PolitiFact | US trade deficit with China is less than $300 billion, not $1 trillion, as Donald Trump said). Tariffs alone have not closed the gap, though they have altered trade flows at the margins. Over the longer term, sustained high tariffs could reshape supply chains: we may see a continued shift of manufacturing for the U.S. market to countries like Mexico, Vietnam, or India, further reducing China’s share of U.S. imports. Such shifts are already underway but will take time to fully materialize (China urges US to immediately lift tariffs, vows retaliation | Reuters) (China urges US to immediately lift tariffs, vows retaliation | Reuters). China, on the other hand, is likely to deepen trade ties with other regions – pursuing free trade deals in Asia, increasing commerce with Europe and Africa – to compensate for lost business with America (China urges US to immediately lift tariffs, vows retaliation | Reuters). This diversification could slowly reduce China’s dependence on the U.S. trade surplus, which in turn might ease the yuan’s reliance on U.S.-dollar inflows.
In the financial realm, the USD/CNY exchange rate will be sensitive to how the decoupling unfolds. A continued adversarial stance with more tariffs or export controls would keep the yuan under pressure, barring a strong rebound in China’s domestic economy. If China’s government responds to the trade war with large-scale stimulus (as hinted by promises of more fiscal spending and infrastructure investment (China urges US to immediately lift tariffs, vows retaliation | Reuters) (China urges US to immediately lift tariffs, vows retaliation | Reuters)), that could boost growth but also might lead to looser monetary conditions and thus a softer currency. The U.S., for its part, will have to monitor how higher import costs feed through to prices – already, American businesses are navigating higher input costs due to tariffs on Chinese intermediate goods. The Federal Reserve’s policy choices (raise rates further, hold, or cut) will be influenced not just by domestic inflation and employment, but also by global factors including the fallout from U.S.-China trade policies. Any hint of reconciliation or a new trade negotiation between Washington and Beijing could quickly alter market sentiment, potentially strengthening the yuan and lifting Chinese stocks on hopes of tariff relief. Conversely, further deterioration – for example, an expanded tariff list or financial sanctions – could induce another bout of yuan weakening and dollar strength.
For now, analysts expect the Chinese yuan to remain on the weaker side as long as the current mix of factors persists: China’s growth is below its potential, its real estate sector is fragile, and interest rate differentials favor the dollar (China steps up scrutiny of capital flows as yuan depreciates | Reuters) (China steps up scrutiny of capital flows as yuan depreciates | Reuters). Chinese authorities have signaled that while they will defend the yuan against disorderly moves, they are comfortable with a gradual depreciation that reflects fundamentals. Indeed, a gently sliding yuan can act as a release valve for the pressures of U.S. tariffs, helping Chinese exporters stay afloat. From the U.S. viewpoint, however, a significantly weaker yuan could offset the intended effects of the tariffs (making Chinese goods cheaper globally despite the duties) and might invite additional scrutiny – it’s a delicate balance. We may see the U.S. Treasury renew focus on currency issues, possibly resurrecting accusations of “currency manipulation” if they believe Beijing is gaining unfair trade advantage via the exchange rate. This would open a new front in the economic confrontation.
In conclusion, the year 2025 has brought heightened tariffs and trade barriers between the U.S. and China, fueling a continuation of their trade imbalance and putting new stress on the financial linkages between the two nations. The U.S.–China trade deficit remains large by any measure, even as trade patterns evolve and decoupling slowly proceeds. And the dollar–yuan exchange rate has become a crucial indicator to watch – reflecting not only interest rate gaps and economic fundamentals, but also the market’s verdict on U.S.-China relations. A volatile or sharply declining yuan would signal deeper trouble, while a stable or strengthening yuan could indicate easing tensions or improved confidence in China. Businesses, investors, and policymakers around the world are closely watching these developments. The trade tussle between the world’s two biggest economies is not just about tariffs or deficits in isolation – it’s about the terms of a complex economic relationship and how it will look in the future. As 2025 unfolds, the interplay of tariff policy, trade flows, and currency values will reveal much about who is bearing the cost of this economic decoupling and how sustainable these strategies are for both the U.S. and Chinese economies. The stakes are high: beyond the political posturing, real industries and jobs hang in the balance, and the stability of the dollar–yuan pair is integral to financial stability in Asia and beyond. Both sides have strong incentives to avoid an uncontrolled escalation that could roil markets or tip the global economy, but for now, the trade war’s effects are clearly visible in the data – and in the dollar-yuan exchange rate that links the two economies. (PolitiFact | US trade deficit with China is less than $300 billion, not $1 trillion, as Donald Trump said) (China steps up scrutiny of capital flows as yuan depreciates | Reuters)