China’s yuan strengthened slightly against the U.S. dollar on Thursday, recovering from a three-month low. This movement was supported by upbeat export data and intervention from state banks, despite growing concerns that re-elected President Donald Trump might impose higher tariffs on Chinese imports.
In October, China’s exports surged at their fastest rate in over two years, driven by manufacturers racing to ship goods to major export markets. This increase was fueled by fears of heightened tariffs from the U.S. and European Union, raising worries of an escalating trade conflict.
“This uptick is likely exporters trying to front-load shipments to minimize the potential damage of a trade war next year,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Exports alone can’t carry China’s economy forward, so we expect a more proactive fiscal policy next year to support growth.”
By 0400 GMT, the onshore yuan 
USDCNY gained 0.09%, trading at 7.1730 against the dollar, rebounding from an earlier low of 7.1950, its weakest level since mid-August. The offshore yuan (USDCNH) traded around 7.188 per dollar by midday.
Trump has proposed tariffs of 60% or higher on Chinese goods to boost U.S. manufacturing, paired with tax cuts. Analysts expect these policies to drive inflation, potentially keeping U.S. interest rates high and putting pressure on currencies of major trading partners, including China.
During Trump’s first term, the yuan depreciated by about 5% against the dollar after the initial round of U.S. tariffs in 2018, and it fell an additional 1.5% in the following year as trade tensions mounted.
"We don’t anticipate that Chinese policymakers will respond to pre-election tariff rhetoric unless it becomes policy," Citi analysts wrote. “If tariffs reach 60%, the yuan might follow previous trends, potentially moving to 7.7-8.0. The People’s Bank of China (PBOC) could allow a controlled depreciation, managing both timing and pace."
Analysts also believe that the PBOC will act early to stabilize market sentiment, showing Beijing’s intent to manage trade imbalances proactively. Sources confirmed that China’s major state-owned banks were selling dollars this week to slow the yuan’s depreciation.
Prior to market opening, the PBOC set the midpoint for the yuan USDCNY, which guides daily fluctuations within a 2% band, at 7.1659 per dollar. This was the weakest setting since November 17, 2023, but 20 pips stronger than the Reuters’ forecast of 7.1679.
“Today’s PBOC fixing doesn’t suggest alarm over the FX market just yet, especially given past policy stances during strong dollar periods,” commented Alex Loo, macro strategist at TD Securities. He noted the central bank’s tendency to set firmer-than-expected midpoints last year and early this year to support the yuan.
“As the National People’s Congress (NPC) continues, we expect the PBOC to cap any sharp increases in USD/CNY through state banks’ dollar sales,” Loo added.
Sources indicated that if Trump returns to office, Beijing might announce a more robust fiscal response, as his second presidency would likely intensify economic pressures on China.
