The yuan broke beyond 7 to the dollar for the first time in over a decade on Monday. Rarely has such a small move in markets been so closely watched—or had so much at stake.

The People’s Bank of China, which has defended seven to the dollar previously, undoubtedly allowed the currency to weaken in response to President Trump’s new tariff threat Thursday. The central bank Monday set the midpoint of the yuan’s daily trading band sharply weaker. Once the spot rate breached seven shortly thereafter, the PBOC issued a statement...