The Chinese currency is facing a challenge! The yuan will have to contend with the current policies of US President-elect Donald Trump. According to CNBC, China’s authorities are grappling with a weakening yuan. Against this backdrop, global investment banks predict that the Chinese currency is set to hit record lows due to potential sweeping tariffs repeatedly threatened by Trump.

As reported by CNBC, major investment banks and research firms forecast that the offshore yuan will weaken to 7.51 per US dollar by the end of 2025. Experts at LSEG believe this will mark the lowest level for the Chinese yuan since records began in 2004. Currency strategists estimate that the yuan would need to reach 8.42 per dollar to fully offset the negative impact of 60% tariffs on all Chinese goods. Since the US presidential election, the offshore yuan has already plunged by over 2%. On November 28, it traded near 7.2514 per dollar.

Recent comments from Trump have further contributed to the yuan's slide. He announced plans to impose an additional 10% tariff on all goods from China entering the US. During his campaign, the Republican also pledged tariffs of 60% or more on Chinese imports.

According to Jonas Goltermann, Deputy Chief Economist at Capital Economics, American tariffs will lead to a stronger dollar, while currencies of other economies closely tied to US trade will experience high volatility.

Previously, during Trump’s first presidential term in 2018, the yuan slumped by 5%, followed by a further 1.5% decline the next year as a new phase of the trade conflict between Washington and Beijing kicked off. It was during this time that the first round of US tariffs on Chinese goods was implemented.

Currently, China’s authorities strictly control the yuan’s value in the domestic market by setting a daily exchange rate. The currency can fluctuate up to 2% from the set range. Outside the country, the exchange rate depends on global market dynamics.

Zhu Wang, a currency strategist at BNP Paribas, warns that the current level of uncertainty is much higher than during Trump’s first term. Moreover, the growing threat of tariffs and the scale of the trade imbalance between China and the US should not be ruled out. Against this backdrop, the BNP Paribas expert anticipates that Beijing will adopt countercyclical measures to prevent excessive appreciation of the national currency.