U.S.-China Tariff Talks Bring Positive News, Could Chinese Yuan Return to the "6" Level?

TradingKey - Following two days of high-level talks over the weekend, U.S.-China trade negotiations have achieved "substantial progress," easing global trade tensions sparked by the tariff war under the Trump 2.0 administration. Goldman Sachs forecasts that the Chinese yuan could appreciate against the U.S. dollar and potentially break through the level of 7 by 2025 year end.

From May 10 to 11, high-level economic and trade teams from China and the United States, led respectively by Chinese Vice Premier He Lifeng and U.S. Treasury Secretary Scott Bessent, held discussions in Geneva, Switzerland. According to Xinhua News, both sides engaged in candid, in-depth, and constructive communication, reaching several important consequences and making substantive progress.

On Monday (May 12), the USD/CNH exchange rate dropped 0.31% during the day, closing at 7.2162—down from its yearly high of 7.4299 recorded in April.

Previously, under the threat of U.S. tariffs, markets had bet that Chinese authorities would introduce further stimulus measures to support economic growth and allow a controlled depreciation of the yuan to offset losses in exports. However, just ahead of the first round of negotiations, Goldman Sachs reversed its stance, predicting instead that the yuan would strengthen.

Goldman expects the USD/CNY exchange rate to rise to 7 within 12 months, with three-month and six-month yuan forecasts set at 7.20 and 7.10, respectively.

The bank added that China may prefer to stimulate the economy through monetary easing and bond issuance rather than depreciating the yuan, as depreciation could exacerbate capital outflows. Overall, therefore, the yuan should remain “broadly stable.”

Goldman noted that Chinese policymakers are likely to continue adopting measured and controlled measures. If the yuan rises to 7 or below, currencies across other Asian countries could also begin appreciating more rapidly against the U.S. dollar.