MUFG said changes in how the U.S. applies tariffs, along with a weaker U.S. dollar, suggest USD/CNY will drift lower over time. It added that China could outperform some Asian exporters because effective tariffs on Chinese exports are expected to fall.
MUFG said some countries that had benefited and secured trade deals are now slightly worse off for now. It also said countries without fully finalised trade deals, such as China and Brazil, are currently better off.
Tariff Shifts Favor China
Global Trade Alert analysis cited by MUFG estimates that effective tariffs for Brazil and China could fall by about 7% to 16% over the next few months. MUFG said this would narrow the tariff gap between China and other Asian exporters.
MUFG said a smaller tariff gap reduces the incentive to re-route exports to the U.S. through other Asian economies. The report noted the article was produced using an AI tool and reviewed by an editor.
We expect USD/CNY to ease lower in a steady, gradual move over the coming weeks. This view is backed by a softer U.S. dollar and, even more importantly, changes in U.S. tariff policy. Together, these shifts make Chinese goods more competitive globally.
New data from China’s General Administration of Customs for January 2026 supports this view. Exports to the U.S. rose 3.5% year over year, beating expectations. This is the first clear rise in six months and suggests lower effective tariffs may already be helping. For traders, this supports a firmer yuan.
Positioning And Volatility Dynamics
This marks a shift from most of 2025. During that period, traders often positioned for a weaker yuan as supply chains moved to other Asian countries to avoid higher tariffs. That re-routing trend now appears to be fading.
While China is improving, Vietnam is seeing slower momentum. In January, Vietnam’s export growth to the U.S. slowed to 1.2%, down sharply from last year’s stronger pace. As China’s tariff disadvantage narrows, firms have less reason to shift production away from China. This change should keep pressure on USD/CNY.
Markets also seem to expect a gradual move, not a sharp drop. One-month implied volatility in USD/CNY has fallen to 3.8%, near the lowest level in more than three months. In a low-volatility setup like this, selling out-of-the-money call options may appeal to traders looking to collect premium while positioning for downside.
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