It’s a day of reduced risk in Asia as traders await Beijing’s reaction to U.S. President Donald Trump’s extensive reciprocal tariffs imposed on China and several other Asian countries.
On Wednesday, Trump revealed reciprocal tariffs on imports from 180 countries, including increased taxes on countries deemed significant offenders, particularly China and the European Union.
He introduced a new 34% tariff on Chinese goods, supplementing an existing 20% tax, which brings the total tariff to 54%—the highest applied to any country. However, Canada and Mexico were not impacted by this latest action.
Market observers suggest the response from China will be critical, as its countermeasures could significantly influence market dynamics.
“All eyes are now on China. If China decides to devalue the Yuan as a response to today’s substantial additional U.S. tariffs, it could trigger a global risk-off sentiment that would first affect emerging markets and then, if sustained, extend back to the U.S. So far, China has maintained a low profile, but that could be changing,” said Robin Brooks, managing director and chief economist at the International Institute of Finance, on social media.
Early Thursday, Beijing requested that the U.S. revoke the tariffs while simultaneously promising a swift retaliation. Concurrently, the Chinese yuan fell to a seven-week low at 7 RMB/USD, which coincided with declines in Asian equities and a looming “death cross” for bitcoin (BTC).
Allowing the yuan to weaken, making Chinese products more appealing in global markets, is one potential response to Trump’s tariffs. However, this could have negative repercussions for carry trades in currencies and unsettle financial markets, as seen in 2015 and 2018.
Moreover, possible intervention by the People’s Bank of China (PBoC) to prevent a rapid drop in the yuan could strengthen the dollar index, unintentionally exerting pressure on risk assets, including stocks and cryptocurrencies.
It’s not surprising that Asian stock markets showed declines at the time of reporting, with Japan’s Nikkei hitting an eight-month low. U.S. stock futures also dropped over 2%, signaling a risk-averse environment.
Bitcoin (BTC), the top cryptocurrency by market capitalization, hovered near $83,300, having slipped from $88,000 to $82,500 following Trump’s tariff announcement, based on data from CoinDesk.
The 50-day simple moving average (SMA) for the cryptocurrency appears set to fall below its 200-day SMA, which would confirm the “death cross,” a bearish technical indicator.
While it doesn’t always accurately predict price trends, the current crossover amid rising trade tensions is noteworthy—especially as options pricing now leans toward puts or downside protection ahead of the June expiration, as reported by Deribit and Amberdata.