US-China Currency War Expected Amid Trade Tensions

The ongoing U.S.-China trade war, marked by steep tariffs on Chinese goods, is now threatening to escalate into a currency war, with both economies experiencing significant market volatility and weakened equity outlooks. Analysts note that Beijing, constrained in its traditional retaliatory options, is likely to allow the yuan to gradually depreciate rather than resort to a sudden devaluation, aiming to support exporters without triggering capital flight or domestic panic. Such a move could help offset the impact of U.S. tariffs but risks spreading volatility to other Asian economies and complicating global inflation and capital flows. Wall Street leaders emphasize the necessity of negotiations, warning that tariffs are stagflationary for the U.S. and deflationary for China, while investors brace for further market pain and a drawn-out resolution process. A weaker yuan could also prompt other emerging markets to consider similar moves, amplifying global financial instability. Ultimately, experts predict a prolonged period of economic uncertainty, with the potential for a deal offering some upside but significant risks remaining in the near term.