Trump Trade War: China’s Exports Slide as Yuan Navigates Uncertain Path

China’s Export Momentum Slows Amid Tariff Truce Weakness

China’s exports increased 4.4% year-on-year in August, marking the slowest growth in six months. This drop missed the 5% forecast and followed a 7.2% gain in July. This was the weakest pace since February, pressured by fading tariff relief and softer demand from its top consumer market.

Moreover, imports rose just 1.3%, missing the 3.0% forecast and slowing from July’s 4.1%.

The slowdown reflects fading momentum from the tariff truce with the US, agreed on 11 August. The deal extended a 90-day pause but kept tariffs of 30% on Chinese goods and 10% on US products in place.

Despite weaker data, Beijing has held back from major stimulus. Officials hope manufacturers can diversify into other markets and buy time before new fiscal steps are required. The August trade surplus reached $102.3 billion, up from June’s $98.24 billion but below the $114.7 billion seen earlier in the summer.

China’s Trade Routes Shift, but US Demand Gap Persists

China’s exports to the US dropped sharply, down 33.12% year-on-year in August. On the other hand, shipments to Southeast Asia have surged 22.5%, showing signs of supply chain reorientation. Moreover, the exports to Asia, Africa, and Latin America are also expanding. However, none of these markets has the consumption power like the US, which absorbs over $400 billion of Chinese goods annually.

Exports have held up longer than expected, but Trump’s tariff threats remain a big risk. In July, he warned of a 40% penalty on goods rerouted to avoid tariffs. This highlights the weakness of Chinese exporters’ workarounds.

Policymakers are cautious about new stimulus. The “cash-for-clunkers” program has used up some local funds, but central leaders have not added more. This shows they prefer trade adjustments over heavy spending.

Yuan Outlook: Trade Pressures Weigh on USD/CNH

China’s slowing exports and weak imports signal pressure on growth, and this weighs on the yuan. The USDCNH pair may face upward pressure as investors expect slower demand and limited stimulus from Beijing. However, the technical charts show uncertain behaviour due to the persistent weakness in the US dollar index. Dovish comments from the Fed drive the weakness in the US dollar index, as markets anticipate rate cuts in September.

Monthly Chart: Yuan Holds Triangle Support, Key Levels in Focus

The long-term outlook for USDCNH is observed using the monthly chart below. It is found that the pair is trading within a blue ascending triangle. The recent drop in the US dollar index pushed the pair down to the triangle’s support.

A break below the 7.10 level could trigger a deeper decline. The pair is also moving within a wedge pattern, marked by red dotted trend lines. The failure to hold strength in the 7.40–7.50 zone highlights resistance at the top. The pair remains in an uncertain zone between the 7.00 and 7.50 levels and awaits direction. A break above 7.50 is needed for bulls to regain control.

Weekly Chart: Yuan Consolidates at Support Zone of 7.00-7.10

The weekly chart below highlights strong consolidation in 2024 and 2025, with the key resistance at the 7.35-7.50 level. The recent drop toward 7.10 remains uncertain, and any rebound from this region would still support a bullish setup. However, a break below 7.00 would signal a negative bias. The move from 7.35 toward 7.10 reflects consolidation and uncertainty.

Daily Chart: USD/CNH Shows Bearish Bias in Short-Term

Despite strong consolidation in USD/CNH, the daily chart shows a bearish bias as the pair broke below the 7.15 level. This level was the neckline of the inverted head-and-shoulders pattern formed in September and October 2024.

Moreover, the 50-day SMA trades below the 200-day SMA, confirming negative price action. However, the pair is now approaching oversold levels, suggesting that the next drop could trigger a strong rebound.

4-Hour Chart: USD/CNH Faces Short-Term Downside Momentum

The 4-hour chart for USD/CNH shows the pair failed to break above 7.15 and continues to move lower. The sharp drop from 7.20, followed by a breakdown below 7.15, confirms bearish price action in the short term. As long as the pair trades below 7.15, the short-term outlook remains to the downside.