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The renminbi weakened and Chinese stocks fell after US President Donald Trump said he may impose 10 percent tariffs against China starting next month.
The CSI 300 index of Shanghai- and Shenzhen-listed companies was down 1 percent by Wednesday afternoon. Hong Kong’s Hang Seng index fell 1.8 percent, led by declines in mainland Chinese listed companies.
The offshore renminbi, which trades without limits imposed by China’s financial authorities, fell 0.3 percent to $7.29 on Wednesday.
The dollar gained 0.15 percent against a basket of currencies including the pound and the yen. The price of gold also rose to an 11-week high of $2,758.
China largely avoided direct attention from Trump during his stormy first day in office, in which he proposed 25 percent tariffs on the U.S.’s biggest trading partners Canada and Mexico, prompting traders to cut bets on a restart the trade war started in his first term.
Trump said a 10 percent tariff was being considered to punish China for the flow the opiate fentanyl to Mexico and Canada. The US has accused China of sending chemicals used to make fentanyl to Mexico where cartels use them to make the drug.
It was a repeat of a threat the new president made during his campaign.
Traders widely expect the U.S. dollar to continue strengthening against the currencies of major trading partners, including China, as higher tariffs and lower interest rates in China weigh on renminbi.
About 27 percent of fund managers surveyed in a Bank of America survey said the “long US dollar” was the most heavily traded in January.
Shares in the rest of Asia rose sharply on Wednesday. Korea’s Kospi rose 1.3 percent and Japan’s broad Topix rose 0.9 percent. Taiwan’s benchmark index rose 1 percent, while India’s Sensex rose 0.2 percent.
During the presidential campaign, Trump also threatened to impose a special 60 percent tax on Chinese imports.
