- Trump has imposed new reciprocal tariffs on China, bringing the total to 54%, sparking concerns about potential Chinese retaliation.
- Asian markets experienced a downturn as traders await Beijing’s response, with the Chinese yuan dropping to a seven-week low.
- Bitcoin dropped from $88,000 to around $83,300 following the tariff announcement, with a potential “death cross” bearish pattern forming.
Asian financial markets tumbled Thursday as investors reacted to U.S. President Donald Trump‘s sweeping new reciprocal tariffs on China and other trading partners. Trump announced a 34% additional tariff on Chinese goods Wednesday, bringing the total levy to 54% when combined with existing 20% taxes. The Chinese yuan promptly fell to a seven-week low of 7 RMB/USD as markets braced for Beijing’s response.
The tariffs target imports from 180 nations, with China and the European Union identified as "worst offenders" receiving the highest rates. Canada and Mexico were notably excluded from the latest measures, according to India-26-per-cent-china-impact-liberation-day-13876781.html”>reports.
Beijing has already urged the U.S. to cancel the tariffs while promising immediate retaliation. The nature of China’s response could significantly impact global markets, with analysts closely monitoring potential currency devaluation as a countermeasure. "Everything now depends on China. If China devalues the Yuan in response to today’s large, additional US tariffs, that sets off a global risk-off that hits EMs first and then – if it persists – spills back to the US," said Robin Brooks, managing director and chief economist at the International Institute of Finance.
Market Reaction and Currency Dynamics
A yuan devaluation would make Chinese exports more competitive internationally, potentially offsetting Trump’s tariff impact. However, this strategy carries risks, as similar moves in 2015 and 2018 triggered significant market turbulence and disrupted carry trades.
The potential for intervention by the People’s Bank of China to slow any rapid yuan decline could inadvertently boost the dollar index, putting additional pressure on risk assets globally. This concern was reflected in immediate market reactions, with Japan‘s Nikkei hitting an eight-month low and U.S. stock futures dropping over 2%.
Cryptocurrency Impact
Bitcoin has not escaped the market turbulence, trading near $83,300 at press time after dropping from $88,000 to $82,500 following Trump’s announcement. According to CoinDesk market data, Bitcoin’s price chart shows a concerning technical development – the 50-day simple moving average appears poised to cross below the 200-day moving average, forming what traders call a "death cross."
While this pattern has a mixed record of predicting future price movements, its emergence amid escalating trade tensions has caught investors’ attention. Adding to bearish signals, options pricing now shows increased demand for downside protection through June expiry, based on data from Deribit and Amberdata.
As global markets digest these developments, analysts suggest the intensity of China’s retaliatory measures will largely determine how deeply the tariff war affects financial markets in coming weeks.
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