As has been pointed out here this week, Trump is trying to force capital out of the “casino” (no crying remember) into treasuries (us debt).
China has a potential symmetric response. And it’s not in tariffs as China knows it runs a trade surplus and this isn’t its realm of leverage. Let me explain. It’s not complicated. If any nation A runs a current account deficit with nation B, then it inevitably appears as a trade deficit.
See en.m.wikipedia.org
Which inevitably builds up the manufacturing base of nation B to the competitive detriment of nation A.
Now consider the nation A had that extra spending capacity because it was more developed in the past but this led to higher wages, prices and entropy/atrophy and inevitably corruption of financial elite classes who benefit through financialisation and offshoring to nation B.
Now as nation be builds its base by giving real tangible goods what does it get back? Paper. Which was immediately converted to the treasuries interest paying debt of nation A.
So Trump is trying to tank this paper scheme to get money back into US bonds and it also chokes China. But China holds huge amounts of these treasuries he’s trying to refloat. Now if you are China. Do you retaliate directly on tariffs where’s you are weak as you run a trade surplus. Or hit them where it hurts. And dump billions in treasuries. Not all at once. But to bare your teeth. And before any suggests the US should buy such a treasury dump on the way down. That’s been tried before and if that happens. Buy gold and silver and lots of it.
Final note. The rate at which this is accelerating is astonishing. And the Chinese have already assumed those bonds will never be paid back now. Because the us wants war and debts aren’t honoured in these times. So why wouldn’t they weaponise this worthless paper at this point?