China Considering Nuclear Financial Option In Response To Trump Trade War
China Considering Nuclear Financial Option In Response To Trump Trade War by Chris Marcus for Arcadia Economics
One of the more fascinating elements of the Donald Trump presidency has been watching him wage a trade war against China. Which has been a truly baffling saga to observe, given that China is also the largest creditor of the United States treasury.
Now, a recent report out of the Chinese media is suggesting that if Trump doesn’t knock it off soon, China may be prepared to end the western system of finance as we know it.
Because while Trump can slap as many trade tariffs on China as he wants, as I wrote about last year, China has always held the financial nuclear option. Selling its U.S. treasuries holdings.
Which is not to say that’s their first choice. Yet if pushed far enough into a corner, they do own over $1 trillion of U.S. debt. Of course almost by the day, Trump seems to be pushing China into that corner as forcefully as possible, and should China unload that position in any significant fashion, it has the potential to crash the U.S. bond market and drastically alter the global financial landscape.
As the trade war has been reheated over the past week, on Monday Trump implemented his latest round of tariffs, while also issuing what at least sounds like a threat to China via twitter (and yes, I do appreciate the irony of how the global financial markets are now dictated by the latest activity on Donald Trump’s twitter feed).
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!”
Which is not all that new or different from some of the comments he’s made in the past.
However what was rather shocking was what a Chinese journalist suggested is being discussed as China’s response.