Chinese stocks and the renminbi have been hit by Trump’s threat of 10% tariffs

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The renminbi weakened and Chinese stocks fell after US President Donald Trump said he may impose a 10 percent tariff against China starting next month.

The CSI 300 index of Shanghai- and Shenzhen-listed companies was down 1% on Wednesday afternoon. Hong Kong’s Hang Seng index fell 1.8 percent, led by major Chinese companies listed in the region.

The foreign renminbi, traded without limits set by China’s monetary authorities, weakened by 0.3 percent on Wednesday to 7.29 dollars.

The dollar strengthened 0.15 percent against a basket of currencies including the pound and the yen.

China largely avoided Trump’s direct attention during his first day in office, where he proposed imposing 25 percent tariffs on major US trading partners Canada and Mexico, which which caused traders to lower the betting amount when they first started trading. The trade war began in his first term.

Trump said that the 10% tax is considered to punish China for the flow of opiate fentanyl to Mexico and Canada. The US has accused China of sending chemicals used to make fentanyl to Mexico where companies use them to make the drug.

It was a repeat of the threat that the new president made during his campaign.

Traders broadly expect the US dollar to continue to strengthen against the currencies of major trading partners, including China, as higher interest rates and lower interest rates in China weigh on the economy. renminbi.

About 27 percent of fund managers surveyed in a Bank of America survey said the “long U.S. dollar” was the most popular trade in January.

Stocks elsewhere in Asia were higher on Wednesday. Korea’s Kospi index was up 1.3 percent and Japan’s broader Topix was up 0.9 percent. Taiwan’s index advanced 1 percent while India’s Sensex rose 0.2 percent.

During the presidential campaign, Trump also threatened to impose a separate 60 percent tariff on Chinese imports.