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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 on Wednesday afternoon. Hong Kong’s Hang Seng index retreated 1.8 percent, led by lower mainland Chinese companies listed in the territory.

The offshore renminbi, which trades free of limits imposed by Chinese financial authorities, weakened 0.3 percent on Wednesday to 7.29 dollars.

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

China avoided direct attention from Trump during his whirlwind first day in office, where he proposed imposing 25 percent tariffs on the US’s biggest trading partners Canada and Mexico, leading traders to to cut bets on the continuation of trade war began in his first term.

Trump said the 10 percent tariff was 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 cartels use it to make the drug.

This is a repeat of a threat made by the new president during his campaign.

Traders widely expect the US 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 “high US dollar” was the most crowded trade in January.

Stocks in the rest of Asia were broadly higher on Wednesday. Korea’s Kospi index rose 1.3 percent and Japan’s broad Topix rose 0.9 percent. Taiwan’s benchmark 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.