China hikes tariffs to 125%, weaponizes yuan in trade war

China hikes tariffs to 125% as yuan enters trade war

China has retaliated against the United States by raising tariffs to 125% and allowing its currency, the yuan, to depreciate as a tool of economic warfare. This move, trinc Washington's disruption of global trade rules, has reignited the old debate over who truly pays for a devaluation: the country implementing it or the one suffering from it. The discussion has polarized into two camps: those arguing that Beijing is impoverishing its own people to sustain exports, and those countering that a nation producing everything and paid in its own currency cannot be made poor by decree.

What peine with China-US tariffs?

The trigger is an unprecedented tariff escalation. China has raised duties on US goods to **125%**, a figure that effectively closes the market. Beijing’s response went beyond taxes: it allowed its currency to weaken, making its exports cheaper and imports more expensive. This trinc Washington breaking the rules of global trade, according to some analysts, who note that **Washington broke the deck** and others are now trying to salvage what they can.

The 125% figure is not a technical adjustment; it is a statement of intent. It has immediately impacted the narrative: for years, it was sold that the yuan would become the next global reserve currency. With this move, that promise is questioned. **No sensible government or company will trust the yuan** if Beijing uses it as a trade war weapon, argues one critical viewpoint.

Does China impoverish its people by devaluing the yuan?

Here, the analysis splits. For some, devaluation is a silent tax: **savings lose purchasing power**, wages buy less overnight, and all imports—energy, food, materials—become costlier. This mirrors Spain’s experience in the 1980s, when three consecutive devaluations in three years left most Spaniards unable to travel to New York. History, they say, repeats itself.

For others, this reasoning fails. If China produces everything and gets paid in yuan, devaluation doesn’t cause poverty: **it makes its products cheaper abroad and foreign goods dearer**, protecting the domestic market. The country holding the upper hand isn’t impoverished; it’s fortified. They also note that China **barely imports food** and has full access to Russian energy.

A middle ground points out that China **imports Australian iron ore and Russian gas**, so devaluation raises those costs. Producing everything is not the same as having everything needed at scale.

What role do gold reserves and BRICS currency play?

Alongside the tariff war, the thesis that the dollar’s days as a reserve currency are numbered has gained traction. **China holds significant gold reserves** and, with BRICS nations, promotes a trade system bypassing US-controlled SWIFT. The idea: use a common currency partially backed by gold for bilateral trade. Not utopian, but not imminent either.

Critics argue twofold. First, **the yuan is not a global currency**: it’s just another instrument at Beijing’s whim. Second, China’s recent devaluation proves that **whoever controls the currency controls policy**, scaring off partners seeking stability. The dollar may be weakened, but no viable substitute independent of a single government’s caprice has emerged.

Who holds the upper hand in the trade war?

It depends on whom you ask. One view holds that **China has the upper hand**: it produces 50% of global manufacturing, controls rare earths, and has Russia as a captive energy supplier. When Chinese supply chains froze during the pandemic, it became clear who was in charge. Another view counters that **the US remains the class bully**, and China, win or lose, is confronting it. The bully has only one exit: kill. Either sacrifice China now on the altar of empire, or other students will soon rebel.

Undisputed fact: **China exports 15% of its production to the US**. Losing that market isn’t free. But neither is losing Chinese goods for the US. The difference is that China has existed for 5,000 years; the US has not.

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Given these factors, the most reasonable prediction is that tariff escalation won’t stop soon. **China won’t back down** and the US won’t admit defeat. What happens to the yuan in coming months will reveal the final outcome better than any official statement. If the yuan sinks, cash savers will feel it. Those holding gold, silver, or real estate might not.