In response to President Trump imposing steep tariffs on Chinese goods, analysts caution China against selling its US government bonds as a retaliatory measure. Despite speculation that such a move could destabilize American markets, experts argue it would likely harm China's economy more due to potential losses on its bond portfolio and increased competitiveness pressure against the US. As China's treasury holdings exceed $700 billion, any significant sale could create panic in global markets already jittery from trade tensions. Current bond yield fluctuations highlight the fragile nature of this situation.
The concern is that China might dump its vast holdings of treasuries, even if that risked major side effects like racking up huge losses on its own portfolio.
China is the second-largest foreign holder of US government debt after Japan, with more than $700 billion in longer-dated treasuries.
If Beijing were to significantly reduce its holdings, it could trigger panic across global markets already on edge over the US administration's protectionist policies.
Bond yields, which rise as prices fall, have already surged to levels not seen since last October, raising eyebrows among analysts.
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